RESOLUTION NO. 2018-0323
Adopted by the Sacramento City Council August 9, 2018
Establish the Cannabis Opportunity Reinvestment and Equity (CORE)
Program and Adopt a Zero-Dollar Fee and Appropriate Funding for Business Permits for CORE Participants
A. On November 28, 2017, the City Council authorized staff to create a program to address the negative impacts of disproportionate enforcement of cannabis related regulation in the city of Sacramento before the adoption of Proposition 64 and directed staff to return to City Council with a resolution to establish the program.
B. The City inquired into the negative impacts of cannabis regulation prior to its legalization in its Cannabis Equity Study (the “Study”) (Exhibit A). The following includes the overall findings of the Study:
C. Cannabis related arrest rates in the City of Sacramento spiked in 2006 with 1,590 total arrest incidents where one charge was related to cannabis. Arrest rates for cannabis related charges precipitously dropped after 2010. In 2010, Governor Schwarzenegger signed Senate Bill 1449 which reduced the charge for possession of one ounce or less of cannabis to an infraction (from a misdemeanor). From 2010 to 2011, cannabis arrest rates fell nearly 45% in the city of Sacramento. From 2006 to 2016 the cannabis related arrest rates citywide dropped 65%, yet were still made disproportionately. (Exhibit A).
D. The racial group arrested more frequently, where the arrest included at least one cannabis charge, was Black/African American. White, Hispanic, and Asian all had arrest rates for cannabis related lower than their citywide populations. Males were significantly more likely to be arrested than females. (Exhibit A).
E. The communities with the highest arrest rates disproportionate to their population in the city between 2004 and 2017, based on zip code were: Downtown (95811 and 95814), Land Park (95818), Oak Park (95817), Parkway Meadowview (95823), Del Paso Heights South (95815), Florin Perkins (95826), Fruitridge (95820), and Elder Creek (95824 and 95828). (Exhibit A).
F. Generally, the highest arrest rates in the above communities were concentrated near low- income household areas.
G. Additionally, Sacramento Police Department Crime Analysis Unit cannabis arrest records for the years 2004-2016 demonstrate that, of a total of 6,124 arrests for cannabis- related crimes only, 3,061 arrestees were Black, or nearly 50 percent. Of a total of 13,652 arrests which included at least one cannabis-related crime, 6,808 arrestees were Black, or nearly 50 percent. Black people comprise only 14 percent of the population in the city of Sacramento according to population demographics for 2016 and 2017 derived from U.S. Census data.
H. High populations of low income residents citywide, recipients of public assistance and food stamps, former foster youth, homeless people, ex-offenders appear to reside within the zip codes as noted in the Golden One Center Priority Apprenticeship program sponsored by the City.
I. Populations, children, families and neighborhoods in these zip codes experienced economic destruction, trauma and displacement in part from disproportionate enforcement of the War on Drugs. Academic literature across multiple decades have consistently noted high arrest rates for black males, relative to their population and compared to white and Hispanic males, and the consequences that happen to families and communities. The reasons for why those disproportionate arrests rates have taken place has multiple competing, but not mutually exclusive theories.
J. Based on the above, staff developed the attached, Cannabis Opportunity Reinvestment and Equity (“CORE”) Program. CORE is a program aimed to assist individuals who have been negatively impacted by the disproportionate enforcement of cannabis-related crimes by providing them with assistance and an opportunity to participate in the new cannabis industry. (Exhibit B).
K. The proposed CORE program includes multiple components with a common goal of creating multiple pathways for communities in these zip codes, individuals and businesses to participate in the cannabis industry by removing typical barriers to entry and facilitating business opportunities for those who otherwise do not have access due to lack of capital or business expertise or criminal history.
L. A successful CORE program will contribute to City tax revenues and support the revitalization of neighborhoods and thriving populations, families and communities due to dollars through the reinvestment of funds and the establishment of businesses owned by persons from the communities negatively and disproportionately impacted by prior enforcement of cannabis-related crimes.
M. CORE will benefit five types of applicants that are either individuals who have been disproportionately impacted as described herein or businesses that directly benefit such individuals.
N. Generally, participants of the CORE Program will have access to various resources and support including assistance with the development of a cannabis- related business plan, and access to business education, mentoring, technical assistance, regulatory compliance, priority processing of certain permit applications, and assistance with expungement of criminal records.
O. CORE Program participants will also benefit from a zero-dollar fee for cannabis business permit fees. The City may set fees at less than full recovery to ensure program access and viability. (See City of Sacramento Fees and Charges Policy, Resolution No. 2018-0168.)
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The findings and declarations of the background statements A through – O are true.
Section 2. The Cannabis Opportunity Reinvestment Equity (“CORE”) Program is hereby adopted. (Exhibit B).
Section 3. The City will continue to evaluate the CORE Program and the Equity Study to address any disparate, negative impacts of cannabis-related regulation and enforcement in the city of Sacramento.
Section 4. The City Manager, or the City Manager’s designee, is authorized to select a vendor to facilitate the CORE Program on behalf of the City through the City’s competitive selection process in accordance with the City Code.
Section 5. The City Manager, or the City Manager’s designee, is authorized to make amendments that are not substantive to the CORE Program. Substantive amendments must be approved by resolution of the City Council.
Section 6. Notwithstanding City Council Resolution No. 2018-0168 for the City’s Master Fee and Charge Report, the fee for cannabis business permits for qualified CORE program participants shall be zero dollars ($0). This fee shall expire upon the expiration of the CORE program.
Section 7. Excess revenue from cannabis-related business operations tax shall be utilized to recover the associated costs of processing business permits for qualified CORE participants by the City.
Section 8. Exhibits A and B are part of the resolution.
Table of Contents:
Exhibit A – City of Sacramento Cannabis Equity Study
Exhibit B – City of Sacramento’s Cannabis Opportunity and Reinvestment Equity Program
City of Sacramento
Office of Cannabis Policy & Enforcement Cannabis Equity Study
I. Purpose of the Study
II. Topline Results
III. History of Cannabis Enforcement
IV. City of Sacramento Demographics
V. Literature Review
VII. Analysis of Cannabis Enforcement in the City of Sacramento
Special Thanks to the City of Sacramento Police Department, Crime Analysis Unit for providing the data which made this report possible.
Report Produced by Daniel Sanchez, Special Project Manager, City Manager’s Office
Completed: May 2018
I. Purpose of the Study:
The Cannabis Equity Study (the “Study”) is intended to determine if and which demographic groups have been arrested at a disproportionate rate to their population within the City of Sacramento. This is important as an arrest and a conviction often mean significantly reduced employment opportunities and life outcomes.1 According to federal government research, a criminal record in the United States makes finding employment much more difficult and people who have been incarcerated earn 10 to 40 percent less than similar people who do not have criminal records.2 Similarly, enforcement of cannabis criminal laws ( “cannabis enforcement” for our purposes) affects the life outcomes of family members of individuals arrested. 3 Groups with higher rates of poverty and experience with the criminal justice system are less likely to have the means to begin successful cannabis businesses. The City of San Francisco and Los Angeles describe various barriers to entry to begin a cannabis business, these barriers include: access to capital, access to real estate, regulatory fees, among others.4 This data is included in the City’s analysis for this Study. Based on this Study, the City of Sacramento intends to develop an equity program to support communities impacted by cannabis enforcement.5
II. Topline Results:
1) Cannabis related arrest rates in the City of Sacramento spiked in 2006 with 1,590 total arrest incidents where one charge was related to cannabis. Arrest rates for cannabis related charges precipitously dropped after 2010. In 2010 Governor Schwarzenegger signed Senate Bill 1449 which reduced the charge for possession of one ounce or less of cannabis to a misdemeanor (from a misdemeanor). From 2010 to 2011, cannabis arrest rates fell nearly 45% in the city of Sacramento. From 2006 to 2016 the cannabis related arrest rates citywide dropped 65%.
2) The racial group arrested more frequently, where the arrest included at least one cannabis charge, was Black/African American. White, Hispanic and Asian all had arrest rates for cannabis related lower than their citywide populations.
3) Males were significantly more likely to be arrested than females.
4) The communities with the highest arrest rates disproportionate to their population between 2004 and 2017, based on zip code were: Downtown (95811 and 95814), Land Park (95818), Oak Park (95817), Parkway Meadowview (95823), Del Paso Heights South (95815), Florin Perkins (95826), Fruitridge (95820), and Elder Creek (95824 and 95828).
5) It is unclear if the locations where people were arrested for cannabis activity are also the same locations where the people who were arrested lived. It is also unclear why those arrests took place. The significant number of arrests-to-population Downtown suggests that the high number of arrests occurred because of people from outside the area (not living in the area) congregating in Downtown and a high police presence in that area due to its civic and entertainment amenities.
III. History of Cannabis Enforcement:
The following is a brief overview of recent US history on cannabis enforcement.
Until recently, US government action on cannabis moved towards greater restrictions and enforcement. The Federal Food and Drug Act of 1906 regulated food and drugs for the first time in the United States and required that any over-the-counter remedies containing cannabis be labeled. In 1937, the Marijuana Tax Act effectively criminalized cannabis. The Act both restricted possession of cannabis and required paying a tax for its authorized use in industrial or medical uses.6 The US Justice Department’s Bureau of Narcotics and Dangerous Drugs was created in the late 1960s which coincided with significant increases in cannabis arrests in California, from 7,560 in 1964 to 50,327 in 1968.7 Furthermore, the Comprehensive Drug Abuse Prevention and Control Act of 1970 created five schedules for regulating drugs based on medical value and assumed danger of addiction. According to the law, cannabis was a Schedule 1 drug, which along with cocaine and heroin, had no medical use and a high risk of addiction. The law also made it a federal crime to manufacture, distribute or possess cannabis.8
The 1990 Crime Control Act, passed by Congress, provided funds for local law enforcement agencies in seizing private property associated with unlawful drug activities, including cannabis cultivation or distribution. From 1991 to 2008, there was a drastic increase of arrests for simple cannabis possession. The number of people arrested for possession of small amounts of cannabis nationally increased by three times as much from 1991 to 2008.9 During the same time, cannabis use did increase but not at the same rate as the number of arrests. From 1991 to 2008, according to the National Household Survey on Drug Abuse, the rate of use over the last year increased from 6,520 in 1991 to 9,797 in 2008, per 100,000 people.
Public opinion shifted on cannabis in the late 1990s. In 1996, California passed Proposition 215, the Compassionate Use Act, which allowed patients and primary care providers to cultivate and possess cannabis for personal medical use. In 2010 Governor Schwarzenegger signed Senate Bill 1449 which reduced the charge for the possession of one ounce of cannabis. In addition, in 2010 the City of Sacramento began to legalize and permit medicinal cannabis dispensaries. This led to a precipitous drop in cannabis related arrests in the City of Sacramento in the subsequent years. The Control, Regulate and Tax Adult Use of Marijuana Act in 2016 passed by California voters allowed cannabis to be used and cultivated legally under state law.
On January 1, 2018 the State of California began issuing licenses for cannabis businesses under the Medicinal Adult Use Cannabis Regulation Safety Act. In 2017 the City of Sacramento Council adopted policies to regulate cultivation, manufacturing and testing of cannabis in anticipation of state law. Later in 2017 the City Council took steps to develop the Cannabis Opportunity, Reinvestment and Equity (CORE) Program that seeks to reduce barriers to entry into the cannabis market by groups disproportionately impacted by cannabis enforcement.
IV. City of Sacramento Demographics:
The data below shows City of Sacramento demographics in 2010. The year 2010 was selected because it is derived from the decennial census where more accurate data is available for subpopulations. Dates between 2000 and 2009 and after 2010, have significant margins of error for subpopulations. A high margin of error makes data less reliable.
Figure 1: City of Sacramento Demographics by Race, 2010
Total population 466,488 Percent
Hispanic or Latino (of any race) 125,276 26.86%
White alone 210,006 45.02%
Black or African American alone 68,335 14.65%
American Indian and Alaska Native alone 5,291 1.13%
Asian alone 85,503 18.33%
Native Hawaiian and Other Pacific Islander alone 6,655 1.43%
Source: US Census Bureau 2010
Figure 2: City of Sacramento Zip Code Population, 2010
Percent of City population within Zip Code
Parkway Meadowview 95823 10.82% 50,451
Greenhaven 95831 8.81% 41,078
South Land Park/Hollywood Park 95822 8.05% 37,570
Natomas North 95835 7.72% 35,992
Natomas South 95833 7.51% 35,040
Del Paso South 95815 7.44% 34,693
Del Paso North 95838 7.05% 32,879
Fruitridge North 95820 6.92% 32,259
Elder Creek 95824 95828 4.20% 19,607
East Sacramento 95816 4.15% 19,341
Natomas Center 95834 5.22% 24,353
Meadowview West 95832 3.47% 16,174
Oak Park 95817 3.46% 16,154
Land Park 95818 3.35% 15,639
Sac State East Sacramento 95819 3.33% 15,516
Center City 95814 2.98% 13,882
Surrounding Center 95811 2.00% 9,347
Florin Perkins 95826 1.36% 6,329
University Howe Ave 95825 0.48% 2,224
Source: US Census Bureau 2010 and City of Sacramento Community Development Department
V. Literature Review
Academic literature confirms that there are disparities in arrest rates for cannabis by geography, race, age and gender. The literature, however, does not have consensus on exactly why certain groups have higher cannabis related arrests rates. It could be that certain racial groups or geographic areas are arrested at a greater rate because those groups have another undetected characteristic (such as greater call volume in a particular area, or higher rates of blue collar occupations—blue collar men have higher chances of being arrested for cannabis than non-blue collar men).10 Some research suggests that Black/African American people are more likely to be arrested for cannabis use because they have less access to private spaces and therefore are more likely to carry out drug use and purchases in public.
Research also shows that Black/African American people are significantly more likely to buy drugs outdoors, from strangers, and further from home—this increases the likelihood that they will be visible to police and therefore more likely to be arrested.11 These differences in cannabis purchasing behavior, however do not seem to account for the differences in arrest rates between Whites and Blacks/African Americans. If it did, according to research, Whites should have significantly more drug arrests. The literature also shows that Blacks/African Americans and Whites do not have significantly different rates of cannabis use.12 This suggests that Blacks/African Americans are not arrested more for cannabis simply because they use more cannabis compared to Whites.
The characteristic of a community is also relevant in determining the arrest rates for Blacks/African Americans and Whites. Arrests for cannabis are more likely to occur in higher visibility areas such as downtowns. Higher police presence per capita is another factor, which the literature suggests, for why Black/African American people are arrested more often for cannabis than White people.13
Research in Seattle notes that race plays a major factor in drug arrest disparities between Whites and Black/African Americans, and that per capita concentrations of police presence or citizen complaints did not account for arrest disparities.14 Subsequent research in Seattle suggests that arrests are largely driven by deployment of police officers and resident’s calls for service.15 This suggests that a data driven method of deploying police resources will pick up more populations in communities that have higher crime incidents and calls for service.
Limitations of the Analysis:
It is beyond the scope of this analysis to determine which, if any, factor led to higher cannabis arrest rates for Black/African American males in Sacramento, as described below. Similarly, this report cannot specify why certain geographic regions had higher cannabis arrests than their populations would suggest.
This report does not measure City of Sacramento Police Department deployment trends, nor does it measure individual cannabis use trends per racial category per year, or methods of purchasing cannabis. The analysis also does not measure whether arrest rates differed because of differential involvement in criminal activity. Data sources for these variables, either were not available or do not exist for the City of Sacramento.
The analysis uses zip code arrest data, but zip codes do not perfectly align with Census tracts. This means that some geographic areas are included in the Census data but should not have because they are outside the city limits.
The analysis shows that Black/African American male residents living in certain zip codes were arrested more often than their population would suggest—but not why. The analysis cannot state the reason in different arrest rates, or whether other factors, such as higher calls for service, were significant.
The primary data source for this study was City of Sacramento Police Department Crime Analysis Unit data by zip code on the number of arrest incidents, where at least one charge was cannabis related, for each year from 2004—2017 by race and gender. This date range was used because the Police Department changed their records management system in 2004. Using data before 2004 would create problems with the accuracy of the data and mean that comparing data before 2004 and after would no longer be possible. This data was used to determine which groups were disproportionately impacted by cannabis enforcement. By “disproportionate enforcement” we mean at a greater rate than the ratio of their citywide or zip code population would suggest.
Census tract data is the most basic unit of measurement for the decennial census which is collected every 10 years and for the continuous American Community Survey. The boundaries of a census tract are developed so that each tract contains roughly 1,200 to 8,000 people. Census tracts roughly, though not exactly, match zip codes within the City of Sacramento. By matching multiple Census tracts together into their zip code, this report provides an estimate of the demographics of each zip code in the City of Sacramento.
Census tract data does not exactly match zip codes, yet this is the closest method to find the demographics of each zip code. This was necessary because the Sacramento Police Department does not collect data by Census tract, nor does the Census Bureau collect demographic data by police beat or zip code. It was therefore necessary to match these two as approximate as possible.
Once a demographic profile of each zip code was developed, including population and the proportion of population by race, this demographic data was compared to corresponding arrest rates. As stated above, arrest data from 2010 forward was used because that is when the most accurate Census tract data was available. There were 10 zip codes out of 20 analyzed which had a higher proportion of arrests for a racial group, than its population would suggest.
VII. Analysis of Cannabis Enforcement in the City of Sacramento:
1) Cannabis related arrests in the City of Sacramento spiked in 2006 at 1,590 and remained relatively stable until 2010. In 2010, Governor Arnold Schwarzenegger signed California State Senate Bill 1449, which reduced the offense for an ounce or less of cannabis possession.16 From 2010 to 2011, cannabis arrest rates fell roughly 45% in the city of Sacramento. From 2006 to 2016, the arrest rates citywide dropped by 65%. By 2017, there were less than two hundred cannabis related arrests in the city of Sacramento.
Figure 3: City of Sacramento Number of Cannabis Arrests by Year 2004 – 2017
Year Number of Arrests
Source: City of Sacramento Police Department
Figure 4: City of Sacramento Number of Cannabis Arrests 2004 – 2017
Source: City of Sacramento Police Department
2) Black/African American residents were arrested, where at least one charge was cannabis related, at a rate higher than their citywide population proportion. Black/African American residents make up only 14.65% of the city’s population but 47.87% of cannabis related arrests in 2010. White and Asian residents were arrested at a lower rate than their population. Hispanic residents were arrested at a comparable, and slightly lower rate to their population. These trends in arrest rates by race also hold for other years, where Black/African American residents are more likely to be arrested given their population while White, Hispanic and Asian residents are arrested at a lower rate to their population. This finding does not intend to suggest why Black/African American residents were arrested at a higher rate.
Figure 5: Number and Percent of Cannabis Related Arrests by Race, 2010
White 299 45.02% 21.99%
Black 651 14.65% 47.87%
Hispanic 318 26.86% 23.38%
Asian 69 18.33% 5.07%
Source: City of Sacramento Police Department and US Census 2010
3) Males in the City of Sacramento were overwhelmingly more likely than females to have an arrest where at least one charge was cannabis related. This figure is comparable to most of the
academic literature which shows that males are significantly more likely to have drug related arrests and convictions.
Figure 6: Gender and Percent of Cannabis Related Arrests 2004--2017
Gender Number of Arrests Percent of Arrests 2004--2017
Male 12211 88.19%
Female 1636 11.81%
Total 13847 100%
Source: City of Sacramento Police Department
4) There are 20 zip codes in the City of Sacramento. Elder Creek (95824 and 95828) has two zip codes which were combined due to their proximity. Each zip code roughly corresponds to a community within the City of Sacramento, such as Oak Park or East Sacramento. Matching each zip code to multiple Census tracts gives a demographic profile for each zip code. This demographic profile contains information on the zip code’s population, and race proportion. Certain zip codes had a higher proportion of cannabis related arrests in 2010 than their population would suggest.
For example, Oak Park (95817) made up 5.51% of all cannabis related arrests in 2010, but only 3.46% of the city population. Greenhaven (95831), meanwhile, constituted 8.81% of the population in 2010, but only amounted to 3.01% of cannabis related arrests. The report therefore recommends Oak Park to be included in a cannabis equity program, but not Greenhaven. Of the 20 zip codes in the City of Sacramento, 10 had a higher cannabis related arrest rate than their population percent.
Figure 7: Number and Percent of Cannabis Related Arrests by Most Frequent Zip Codes, 2010
Percent of Population, 2010 % of Cannabis related Citywide Arrests, 2010
Surrounding City 95811 34 2.00% 2.50%
Center City 95814 154 2.98% 11.32%
Land Park 95818 100 3.35% 7.35%
Oak Park 95817 75 3.46% 5.51%
Florin Perkins 95826 28 1.36% 2.06%
Fruitridge North 95820 118 6.92% 8.68%
Elder Creek 95824 95828 85 4.20% 6.25%
Del Paso South17 95815 98 7.44% 7.21%
Parkway Meadowview 95823 174 10.82% 12.79%
Source: City of Sacramento Police Department
5) Certain groups (male and black) and certain geographic areas (95811, 95814, 95818, 95817, 95826, 95820, 95824, 95828, 95815, 95823) had cannabis related arrests at a higher rate than their population would suggest. Exactly why these regions and groups have higher cannabis related arrests is not clear. This data also does not tell whether people who were arrested in certain areas lived in those locations in which they were arrested.
Some data suggests that people were arrested in places removed from where they lived. In the City Center (95814) most of the cannabis related arrests are concentrated between 7th and 9th street along L Street. This is the same location as the former 815 L Street Nightclub and the old Greyhound Bus Station. For this reason, the report recommends removing 95814 from the list of zip codes eligible to participate.
The cannabis related arrests for the zip code 95818 are concentrated around two public housing complexes. Such may be the case for other areas. For this reason, the report also discusses the impact of disproportionate cannabis enforcement for low income households.18
Further considerations: Convictions:
The City of Sacramento may wish to include a cannabis related conviction as an eligibility criterion. This is because a criminal conviction record can limit a person’s ability to gain employment, apply for public assistance, or obtain a loan. Individuals convicted of drug offenses are often subject to fines, court costs, incarceration and other disadvantages. The Government Accountability Office (GAO) identified 641 additional consequences from a nonviolent drug conviction. These consequences include limited ability to achieve education, employment and government benefits. According to the GAO, 78% of these consequences can last a lifetime.19
Early research suggests that a criminal conviction stigmatizes individuals with a criminal conviction, and that employers are less likely to respond positively to prospective employees with past convictions.20 Similarly, employers are more likely to hire welfare recipients or applicants with scant employment history rather than former felons, according to survey research in four metropolitan areas.21 Research also suggests that, since many jobs are found through personal connections that match potential workers with employers, these connections are weakened during incarceration. Former felons are therefore more likely to struggle to find employment, in part because their social circles are less likely to provide employment leads.22 The evidence also suggests that incarceration lowers a person’s earnings, though not always the ability to find employment. The negative impacts on earnings is greater for older employees and white-collar workers.23
An arrest or conviction can have significant negative impacts on an individual’s lifetime outcomes. This increases a person’s likelihood to remain in poverty. Previous Equity Studies have, therefore, included income as an eligibility criterion; this report also recommends the inclusion of income as an eligibility criterion.24 According to the US Census Bureau the Median Household Income for Sacramento was $57,509 in 2016.25 Meanwhile, 21.4% of the population of Sacramento was in poverty.
The City of Sacramento seeks to create an equity program to support groups with disproportionately higher rates of cannabis related arrests than their population would suggest. As such, this report recommends extending the program to:
Type 1: A resident of the city of Sacramento who has lived in the following zip codes for five (5) consecutive years between 1990 and 2011, 26 and who resides in a Low-Income Household. 27
These zip codes are:
Type 2: A resident of the city of Sacramento who resides in a Low-Income Household and was either a) arrested or convicted for a cannabis related crime in the city of Sacramento during the time specified in Type 1, or b) is an immediate family member of an individual described in subsection a of Type 2.28. For the purposes of this report an immediate family member is a child or a parent. Limiting the program to residents who lived in these zip codes prior to 2011 is because from 2011 forward, the number of cannabis related arrests dropped precipitously.
Barriers to Entry:
Previous Cannabis Equity Studies in Oakland, San Francisco, and Los Angeles have described significant barriers to entry for individuals and communities impacted by cannabis enforcement. Some of the significant barriers to entry are due to the nature of the new industry including an evolving regulatory framework, uncertain federal prohibitions, limits on banking due to federal regulations, real estate, utilities and capital requirements to starting the business. These are significant challenges for any entrepreneurs, but they are even more pronounced for individuals who are low income and have history with the criminal justice system.
Below is a Description of Barriers to Entry and Potential Tools to Overcome the Barriers.
Location: The availability of real estate appropriate for a cannabis business is a barrier to entry. This is due to travel distances, and the cost of purchasing or leasing in appropriately zoned locations.
Disadvantaged groups may not have access to a reliable method of transportation, while the cost of purchasing or leasing space for a cannabis business may include deposits and insurance costs which eligible individual equity applicants may not have.
Financial: Banks are regulated by the federal government and depend upon federal deposit insurance. Banks are subject to significant penalties if they knowingly do business with a customer suspected of criminal activity. A cannabis business, under existing federal laws is not lawful. Currently, few banks and credit unions offer traditional financial services to cannabis businesses.29 As a result, cannabis business often must rely on cash to conduct business. Property owners and real estate professionals often do not accept cash and may be cautious to engage with an all cash business. All cash cannabis businesses may also be exposed to a greater amount of criminal activity which may increase the costs to insure the business. Furthermore, City of Sacramento conditional use permit fees and Business Operation Permit fees can increase the costs to beginning a business to tens of thousands of additional dollars.
Start Up Costs: According to the City of Los Angeles Equity Study, the start-up costs for cultivating cannabis outdoors in California range from $5,000 to $10,000. Meanwhile the start up costs for mixed light cultivators is between $18,000 to $200,000 for greenhouses. Electricity costs can hover around $5,000 annually. According to the California Department of Food and Agriculture, indoor cultivation start-up costs may exceed $400,000 for creating indoor grow rooms.30 Without traditional methods of raising capital, entrepreneurs may need to rely on personal wealth, which eligible individual equity applicants are less likely to have.
Business Skills and Knowledge: Eligible individual equity applicants are less likely to have significant business expertise as they are likely not employed or working in industries that expose them to the necessities of starting a business, likely reside in neighborhoods with similar disadvantaged individuals, and have limited access to capital to fund such educational pursuits. Beginning a business requires knowledge of creating a business plan, relationship with industry vendors, knowledge of regulatory and legal requirements. Beginning a cannabis business, meanwhile requires specialized agriculture, chemicals or manufacturing knowledge.31
Lack of Regulatory and Government Knowledge: Groups with little experience, or negative experience with city government or government in general may be more likely to struggle to navigate through the complex regulatory and permitting process of developing a legal cannabis business. Eligible individual equity applicants may also have less awareness of local government policies nor be able to afford professional services to help them navigate such as attorneys or professional consultants.
Below is a Description of Potential Tools to Overcome Barriers:
Financial Assistance: The City of Los Angeles Equity Study describes a municipal bank which could provide business loans and other financial products to cannabis businesses. The City could also provide low interest or no interest loans to cannabis businesses. Other financial support could include credit repair, financial planning needs, fee waivers, and assistance securing alternative financing.
Real Estate: An Equity Program could provide real estate support to entrepreneurs through an existing industry partner or an incubator program. An incubator could provide eligible businesses real estate and other business support services. Similarly, an existing cannabis business could provide real estate to disadvantaged entrepreneurs in return for certain incentives.
Business Support Services: In addition to direct financial assistance and real estate support, the city could provide business mentorship, and technical assistance. This could include consulting services on financial management, business accounting, hydroponics, manufacturing, obtaining licenses or fertilizers. Eligible individual equity applicants are less likely to be familiar with legal requirements of establishing a business, particularly a cannabis business. Connections to legal services could also assist such applicants with beginning a cannabis business.
Permit and Business Operation Permit Fees: Previous cannabis equity studies have considered the option of waiving or reducing licensing, permitting and inspection fees to reduce the financial barriers for eligible individual equity applicant entrepreneurs.
Expungement of Past Cannabis Criminal Convictions: According to the Los Angeles Equity Study, expungement of cannabis related convictions would lift certain employment barriers and the stigma that individuals carry from having a criminal record. Expungement would mean that previous cannabis related charges would change from “guilty” to “dismissed.” While having “dismissed” on a criminal record is preferable than “guilty,” individuals would, however, continue to have a criminal record and therefore may retain some stigma.32
CITY OF SACRAMENTO
CANNABIS OPPORTUNITY REINVESTMENT AND EQUITY PROGRAM
The City of Sacramento has determined, based on its 2018 Cannabis Equity Study, that a two-year pilot program dedicated to aiding communities who were subject to criminal law enforcement of cannabis related crimes at a disproportionate rate to their population within the City and, as a result, were negatively impacted is in the best interests of the City. As such, the City has adopted the Cannabis Opportunity Reinvestment and Equity Program (CORE) described herein.
1. Program Purpose. The CORE Program seeks to reduce the barriers of entry and participation for communities that have been negatively impacted by the disproportionate law enforcement of cannabis related crimes by providing them access to cannabis business development resources, services, and contracting and shareholder opportunities described herein. The CORE Program is a conscious effort to provide the business plan development, training, mentoring, and support necessary to ensure that the emerging cannabis market is accessible to all, regardless of economic status, gender, racial, cultural background and criminal history. Although City funding for the CORE Program’s cannabis business development resources and services shall expire in two years from the date of adoption (unless such time for these pilot program support services are otherwise reduced or extended by resolution of the City Council), all other program definitions, eligibility, processing, benefits, features and functions shall remain intact as policy.
2. Definitions. Except for as provided herein, for purposes of the CORE Program, the words and phrases defined in chapters 1.04 and 5.150 of the Sacramento City Code shall have the same meaning herein. Further, the following words and phrases shall have the meanings respectively ascribed to them by this section:
a. “Ancillary business” means support business services (e.g., human resources or payroll and call centers).
b. “Applicant” means an individual or business who makes a formal application to be admitted in the CORE Program.
c. “Business” means a firm, organization, association, partnership, business trust, corporation, company, or like entity.
d. “Cannabis Social Enterprise” or “CSE” means a cannabis business in the city that incubates and/or employs Classifications 1 or 2 participants and uses commercial strategies to maximize improvements in financial, social, and environmental well-being of the disadvantaged community the organization sits in. This may include maximizing social impact alongside profits for external shareholders. CSEs can be structured as a for-profit or non-profit organization and may take the form of a co- operative, mutual organization, a disregarded entity, a social business, a benefit corporation, a community interest company, a company limited by guarantee, or a charity organization. They can also take more conventional structures. Social enterprises have both business goals and social goals. As a result, their social goals are embedded in their objective, which differentiates them from other organizations and corporations.
e. “Classification” means a category of individuals or businesses that meet either Classification 1, 2, 3, or 4 of the CORE Program.
f. “CORE Incubator” or “Incubator” means a cannabis business which as a condition for receiving priority processing, either:
1. Hosts a participant; 30% of its workforce are Classification 1 or 2 eligible participants, measured by hours worked; and contracts no less than 51% of its cannabis products or services and ancillary business support with eligible participants; or
2. Is a shared manufacturing cannabis business and donates at least 10% of its hours of operation to allow participant(s) to utilize 100% of its business’ floor space and equipment; or
3. Is a cannabis business that sells, gives or otherwise transfers no less than a 33% equity share in the CORE Incubator’s cannabis business to eligible CORE participants or participants; 30% of its workforce be Classification 1 or 2 eligible; and contracts no less than 30% of its cannabis and ancillary business with Classification 1 or 2 eligible participants.
CORE Incubators shall host, donate to, employ, contract with, sell, give, or transfer to participants that reside within the city district in which the Incubator sits. If no such participants exist, Incubators shall utilize participants from other applicable areas.
g. “CORE Program” or “the program” means the City’s Cannabis Opportunity Reinvestment and Equity Program.
h. “CORE Program participant” or “participant” means an individual or a business that has been admitted to participate in the CORE Program.
i. “Equity share” means an ordinary share, including a fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights.
j. “Facilitator” means the organization selected by the city to facilitate this Program on behalf of the city.
k. “Floor space” means at least 10%, but not less than 800 square feet, of building space.
l. “Host” means to rent or lease operations-ready building or floor space to a participant that resides in the city district where the cannabis business sits, if any, free of charge for two years, or at a rate of 33% of the market value for four years; and to provide that participant with business or technical assistance (e.g., business plan development, coaching on access to capital, and establishing a lawful business, or use of equipment). If no such participants exist, participants from other applicable areas shall be utilized.
m. “Immediate family member” means a person in the first, second, or third degree of lineal or collateral kinship as defined in chapter 13 of Part 1 of Division 1 of the California Probate Code.
n. “Incubate” means to assist one or more participants that reside in the city district where the cannabis business sits, if any, to enter the cannabis industry by hosting, providing training, technical assistance, and general business guidance. If no such participants exist, participants from other applicable areas shall be utilized.
o. “Individual” means a person.
p. “Low income household” has the same meaning provided in Sacramento City Code section 17.712.020.
q. “Operations-ready” means a hosted building or floor space that is in compliance with the applicable health and safety laws and regulations and has the appropriate equipment and licensure to lawfully run or conduct any type of cannabis business.
r. “Priority processing” or “priority” means the City will review and approval of cannabis related business or conditional use permit applications or renewals of CORE participants, if any, before any cannabis related business or conditional use application or renewal received by the City that would otherwise be processed on a first come, first served basis.
s. “Sits” means to be engaged in its cannabis business.
3. Applicability of Sacramento City Code chapter 5.150. All CORE Program participants are subject to the provisions of chapter 5.150 of the Sacramento City Code.
4. Applications for the CORE Program. An individual or business may apply for the CORE Program by filing an application with the Facilitator. The application shall be on a form approved by the City Manager and may require information or documentation consistent with the provisions of the city code or state law and this program, including the following:
i. The information provided in city code sections 5.150.210 A.1.b, A.3.a., and A.9.
1. Must be lawfully able to work in the United States;
2. Twenty-one (21) years of age or older;
1. A description of the statutory entity or business form that will serve as the legal structure for the applicant and a copy of its formation and organizing documents, including, but not limited to, articles of incorporation, certificate of amendment, statement of information, articles of association, bylaws, partnership agreement, operating agreement and fictitious business name statement.
iv. A statement dated and signed by the applicant, under penalty, affirming that the applicant meets the program eligibility
requirements as applicable to the particular applicant.
5. Review Process. The Facilitator shall review and approve all CORE program applications that meet the eligibility requirements described herein. If an application is denied, that applicant may appeal to the City for evaluation and a final determination.
6. Program Eligibility. To be admitted into the CORE Program, an applicant must provide documentation, as described in section 7 below, that sufficiently demonstrates that the applicant satisfies any one of the following Classifications:
a. Individuals. An individual that is eligible to participate in the program is either:
i. Classification 1. A current or former resident of the City of Sacramento who previously resided or currently resides in a low- income household and was either: a) arrested or convicted for a cannabis related crime in Sacramento between the years 1980 and 2011; or is b) an immediate family member of an individual described in subsection a of Classification 1 or Classification 2.
ii. Classification 2. A current or former resident of the City of Sacramento who has lived in a low-income household for at least five (5) years, between the years of 1980 and 2011 in the following zip codes:
95811, 95815, 95817, 95820, 95823, 95824, 95826, 95828,
b. Businesses. A cannabis business that is eligible to participate in the program is either:
i. Classification 3. A cannabis business with not less than 51% ownership by individuals meeting Classifications 1 or 2 criteria that reside within the city district in which their business sits, if any. If no such individuals exist, individuals meeting Classifications 1 or 2 criteria from other applicable areas may be utilized.
ii. Classification 4. A cannabis business that is a CORE Incubator.
iii. Classification 5. A Cannabis Social Enterprise with not less than 51% ownership by individuals meeting Classifications 1 or 2 criteria.
7. Documentation and Review. An applicant shall provide the following with its application for the Program, in addition to any other documentation that the City deems necessary to determine the applicant’s eligibility:
a. Proof of Income. Proof of income shall be supported with federal and state tax returns and at least one of the following documents from the last five (5) years: two months of pay stubs; proof of current eligibility for General Assistance, food stamps, Medi-Cal/CalWORKS, supplemental security income, or social security disability, or similar documentation.
b. Proof of residency. Proof of residency shall be supported by a minimum of two of the following documents: California driver’s or identification card records, property tax billings and payments, signed rental agreement, verified copies of state or federal tax returns with an address in the geographic area of the city of Sacramento, school records, medical records, banking records, Sacramento Housing Authority records, or utility, cable, or internet company billing and payment records.
c. Proof of arrest or conviction of a cannabis related crime. Proof of an arrest or conviction of a cannabis related crime shall be demonstrated by federal or state court records indicating the disposition of the criminal matter, records expungement documentation, or any other applicable law enforcement record.
8. Participant Benefits. General program benefits may include but are not limited to: business plan development, business mentoring, coaching on access to capital, business needs assessment, loan readiness assessment, market assessment, data and research strategies and support, assistance with establishing a legal entity, assistance with criminal records expungement, lease negotiation assistance, small business legal considerations, mentoring, fiscal management, marketing/social media, technical training, employee training, and regulatory compliance.
A CORE Program participant shall be entitled to receive the following benefits based on the applicable Classification:
a. Classifications 1, 2, 3 & 5: Participants shall receive the following:
i. All support services offered under the program,
ii. The City will provide priority processing of the participant’s cannabis related business and conditional use permits,
iii. The fee for a participant’s cannabis related business permit is waived by the City,
iv. The City will provide priority to participants for storefront cannabis dispensary permit lotteries procedures as will be adopted by the City Council (Sacramento City Code section 5.150.350), and
v. Admittance into the program shall be deemed to satisfy the neighborhood responsibility plan requirement under Sacramento City Code section 17.228.920.
b. Classification 4: Participants shall receive the following:
i. Qualified and ready CORE participants to host,
ii. The City will provide priority processing of the participant’s cannabis related business and conditional use permits.
9. CORE Condition on Cannabis Business Operations Permit. CORE Classifications 3, 4, and 5 participants are required to continue, maintain, and carry out their respective eligibility requirements through the term of their respective cannabis business operations permit. Compliance with this section 9 shall be a condition of Classifications 3, 4, and 5 participants respective cannabis business operations permit, such that failure to comply with this section 9 shall be grounds to deny, suspend, or revoke such cannabis business operations permit pursuant to Sacramento City Code section 5.150.240(C).
10. Program Monitoring and Reporting. The Office of Cannabis Policy and Enforcement shall provide quarterly updates to the City Council on the status of the CORE program, including number of participants, participant success measured by the number of participants either ready to obtain or that have obtained a cannabis business operating permit. The City will reevaluate and update its Equity Study when data becomes available or known to it that may expand the eligibility and benefits of the program; including, but not limited to, an analysis of disproportionate impacts within census tracts. Additionally, the report should include an evaluation of any ongoing barriers to entry and participation, any reevaluations of the Equity Study, and recommend solutions as needed to advance equity and accomplish the City’s goals, which includes achieving 50 percent of all cannabis business permits awarded to CORE participants.
1 Labelling, life chances and adult crime: The direct and indirect effects of official intervention in adolescence on crime in early adulthood. Bernburg, Krohn. 2003.
2 Economic Perspectives on Incarceration and the Criminal Justice System. The White House. Office of the Press Secretary. 2016.
3 Cannabis Social Equity Analysis Report. Amec Foster Wheeler Environment and Infrastructure, Inc. 2017. 4 City and County of San Francisco. Cannabis Equity Report. Office of Cannabis, Human Rights Commission, Controller’s Office. 2017.
5 This report uses data on arrest incidents where the incident included at least one cannabis charge. The report also analyzed data on arrests for cannabis charges only. The distribution of the data on arrests for cannabis only was nearly identical to the data on arrest incidents where the incident included at least once cannabis charge. The main difference between the two data sources was that cannabis only charges were roughly half of the volume of arrests where cannabis was one of the charges. Both data sources are included in the attachments.
6 PBS Frontline. Marijuana Timeline.
7 Institute of Medicine Committee for the Substance Abuse Coverage Study, 1992.
8 Cannabis use in the United States: Implications for policy. Harrison, Backenheimer, and Inciardi. 1995.
9 How Risky is Marijuana Possession? Considering the Role of Age, Race, and Gender. Nguyen and Reuter. 2012.
10 Arrest Probabilities for Marijuana Users as Indicators of Selective Law Enforcement. Johnson, Petersen, Wells. 1977.
11 Racial differences in marijuana users’ risk of arrest in the United States. Ramchand, Pacula, Iguchi. 2006
12 How Risky is Marijuana Possession? Considering the Role of Age, Race and Gender. Nguyen and Reuter. 2012.
13 Predicting drug arrest rates: Conflict and social disorganization perspectives. Mosher. 2001.
14 Race, Drugs and Policing: Understanding Disparities in Drug Delivery Arrests. Beckett, Nyrop, Pfingst. 2006.
15 Race, Place and Drug Enforcement. Engel, Smith, Cullen. 2012.
16 State of California. California Legislative Information. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=200920100SB1449
17 Del Paso South (95815) in 2010 had slightly less cannabis related arrests given its population. However, between 2004-2017, 95815 experienced a higher cannabis arrest rate than its population would suggest. The population of 95815 is roughly 7% of the city while it made up nearly 9% of cannabis related arrests (2005—2017) in the City of Sacramento. For this reason, Del Paso Heights South was included.
18 “Low income households” as defined by Sacramento City Code section 17.712.020.
19 Cannabis Social Equity Analysis Report. Amec Foster Wheeler Environment and Infrastructure, Inc. 2017.
20 Delinquency and Stigmatisation. Buikhuisen and Dijksterhuis. 1971.
21 What Employers Want: Job Prospects for Less Educated Workers. Holzer. 1996.
22 The Labor Market Consequences of Incarceration. Western, Kling and Weiman. 2001.
23 The Labor Market Consequences of Incarceration. Western, Kling and Weiman. 2001.
24 Cannabis Social Equity Analysis Report. Amec Foster Wheeler Environment and Infrastructure, Inc. 2017.
25 United State Census Bureau. QuickFacts. Sacramento county, California.
26 The 2011 year has been selected because from 2011 forward, cannabis related arrests dropped significantly citywide.
27 City of Sacramento Title 17: Section 17.712.020 “Low income household” means a household whose income
does not exceed 80% of median income applicable to Sacramento County, adjusted for family size as published and annually updated by the United States Department of Housing and Urban Development pursuant to section 8 of the United States Housing Act of 1937.
The County of Sacramento Median Household income in 2016 was: $57,509.
28 The City of San Francisco Equity Study has recommended to make the following serious criminal convictions not eligible: offenses that include violent felony conviction(s); serious felony conviction(s); felony conviction(s) with drug trafficking enhancements; felony conviction(s) for hire; employing or using a minor to transport, carry, sell, give away, prepare for sale, or peddle any controlled substance to a minor; or sell, offer to sell, furnish, offer to furnish, administer, or give away a controlled substance to a minor.
29 Cannabis Social Equity Analysis Report. Amec Foster Wheeler Environment and Infrastructure, Inc. 2017.
30 California Department of Food and Agriculture. 2017. Economic Impact Analysis of Medical Cannabis Program Regulation: Standardized Regulatory Impact Assessment.
31 City and County of San Francisco. Cannabis Equity Report. Office of Cannabis, Human Rights Commission, Controller’s Office. 2017.
32 Cannabis Social Equity Analysis Report. Amec Foster Wheeler Environment and Infrastructure, Inc. 2017.