After marijuana was legalized in 2012, Colorado leaders began creating rules and regulations for scores of people who were already lining up to take part in what has become a $2.2 billion retail cannabis industry.
State leaders took a hardline stance while creating cannabis industry rules, initially barring people with drug convictions from owning dispensaries or marijuana grow houses, for example.
Those early rules edged out many would-be entrepreneurs of color and favored the wealthy and well-connected. Now there’s an effort to open access to all, but some are questioning whether the Denver Social Equity Program is too little, too late, and emerging when space to open a pot shop is challenging, at best.
State leaders’ idea, lobbyist Samantha Walsh said, was to keep an “undesirable element” out of the industry. But the unintended consequence was that while wealthy and well connected people thrived at growing and selling recreational cannabis, many people of color and others with fewer resources have not been able to break into the industry.
Denver leaders said they’re working to create a more equitable marketplace, including by limiting new licenses for the next five years to only social equity applicants, such as those who have lived in low-income neighborhoods and who were most negatively impacted by the war on drugs. But social equity applicants attempting to navigate the complex process of identifying a location for their businesses, and getting it licensed, say the city’s super-saturated market is making it impossible to set up a new shop or a grow site.
The biggest hurdle, they say, is the proximity rule that prohibits one cannabis business from existing within 1,000 feet of another, or closer than 1,000 feet to schools, day care centers, recreation centers or drug treatment centers.
Applicants who have spent thousands of dollars to participate in the city’s social equity program but hit the 1,000-foot wall say city leaders must make changes before participants can be successful.
“Does it matter if there’s grow facilities right next to each other, or manufacturing facilities right next to each other?” asked Walsh, who represents Simply Pure dispensary and Black Brown and Red Badged, a trade group for cannabis entrepreneurs of color. “Look at our entire downtown area. There’s brewery next to brewery next to brewery. There’s bar next to bar next to bar. No one really bats an eye about that.”
Since the city’s social equity program started in June, the city has received 36 applications from social equity applicants who want to own dispensaries, delivery companies, cultivation sites and hospitality businesses. Of those, 19 are pending, 13 have been approved and four applications have been denied, said Eric Escudero, director of communications for the Denver Department of Excise and Licensing, the regulatory authority creating and enforcing cannabis rules in the city.
In the same period, the city has processed 642 proximity checks for social equity applicants and for existing cannabis retail owners looking for a better location, and just 113 of those spots would likely meet the zoning rules for a new cannabis business, Escudero said.
“The idea of, ‘There aren’t locations,’ it’s just not true,” Escudero said. “It’s hard to find a location. But saying there are no locations — it’s just not factually accurate.”
About 70% of Denver is zoned residential only and therefore ineligible for commercial uses, he said, making it harder for equity applicants to find a space.
Rayshawne Thomas grew up in Montbello, a northeast Denver neighborhood that was heavily impacted by the war on drugs, the government-led initiative that aimed to stop illegal drug use, distribution and trade by dramatically increasing prison sentences for people convicted of possessing and dealing illicit drugs. As a kid, he watched police stop and frisk people and arrest some of them for possession of marijuana and other petty drug offenses.
When the Denver Social Equity Program emerged, Thomas, who comes from a family of farmers, felt qualified. But after spending $5,000 and after searching for eight months for a location that would meet zoning rules, Thomas said he knew there would be no place for him to start his growing business in Denver.
Since then, he has applied for his state cultivation license and recently received a local license to operate his new growing operation, Growzillas5280 Farms, in the cannabis-friendly San Luis Valley. Although the three-hour drive from his home in Denver to his farm in Moffat puts stress on his vehicles, and networking in a rural area is much harder, Thomas said he’s committed to making his business as successful as possible.
When he began his search for a location in Denver, Thomas said others had told him the process would feel like finding a needle in a haystack.
“That’s not true,” he said, “it’s like finding water in a desert. I am very persistent and I work hard, so, when I gave up, I knew that it was just not there.”
There are 206 cannabis retail store locations in Denver alone. None are within 1,000 feet from another cannabis business, day care, school or drug treatment facility.
City leaders have stood firm in rejecting requests to waive the 1,000-foot rule and have said it is in place to reduce youth cannabis usage.
Many people against legalization had predicted use by kids would skyrocket after pot was legalized in Colorado in 2013, and it became the city’s priority soon after, to prevent that fear from becoming a reality, Escudero said. Studies show that the more youth are exposed to cannabis and other drugs, the more likely they are to use those substances, he said. However, cannabis advocates say that having stores next to schools is not harmful to children.
If city council leaders continue rejecting pleas to remove the 1,000-foot zoning rule, cannabis advocates will introduce a ballot initiative that would allow social equity applicants to waive the rule if passed, said Sarah Woodson, chief compliance officer of High Demand Delivery and executive of The Color of Cannabis.
In late fall, her organization sent out a petition that has collected more than 500 signatures calling for the city council to remove the 1,000-foot proximity restriction. Her organization has also compiled a list containing around 70 locations where social equity applicants have tried to open up new businesses but could not because of zoning restrictions.
“My organization is going to move forward, full force, to get this removed,” Woodson said. “The thing that I’m always trying to get social equity applicants to realize is that we have to change policy ourselves.”
The city has likely felt pressure from Denver’s entrenched marijuana business leaders who likely don’t want increased competition from new cannabis businesses opening nearby. But it would help their public relations profiles if existing business owners agreed to help social equity applicants get justice through the proposed waiver process, Walsh said.
“I had one client where it was like 998 feet from the back of the Denver Rec Center,” she said. “So they weren’t able to secure that location, and then on top of that, even if you do find a place, is that property owner going to rent to you?” she asked. “A lot of the space that they say is open is private commercial real estate that is definitely not interested in leasing to marijuana businesses.”
Felony possession
Michael Diaz-Rivera was 19 when he was pulled over by police in January 2006 and charged with felony possession of marijuana, even though he had less than half an ounce of weed on him at the time. The felony conviction made it difficult for him to find jobs and stable housing.
When weed became legal, Diaz-Rivera had hopes of entering the lucrative industry and when the social equity applicant program was instituted, he was eager to open a dispensary.
“I wanted to start a retail store here in Colorado. It’s the best business model. It’s the one that makes money,” he said. “But as soon as I started to do my research, I realized that the 1,000-foot rule was the main thing that was going to keep me from even finding a location.”
After three months of looking, he decided instead to apply for a cheaper transport and delivery license, which is not subject to the 1,000-foot zoning restriction. But now, he said, his income is not sustainable. He makes about $20 per delivery. Most Colorado customers are used to buying weed from stores themselves. For delivery companies to build a sustainable revenue stream, they must remind customers about the benefits of home delivery, he said. Now Diaz-Rivera is working to develop as many partnerships with existing dispensary owners to keep his Better Days Delivery company afloat.
While the Social Equity Program is in force, existing dispensaries must only use delivery services provided by licensed transporters in the social equity program. Some stores have abided by the rule, while others are “waiting it out,” not planning to add a delivery option until after the program ends in 2027, Escudero said.
That lack of participation is one of the most discouraging aspects of the social equity program, Escudero said. If existing cannabis businesses don’t step up before the program is over, social equity applicants with delivery licenses will go out of business, he said.
“It’s becoming very clear, very quickly, that when presented with the cheaper option, or the easier option, cannabis companies aren’t going to choose the social equity route. They’re going to choose whatever is better for their bottom line,” said Peter Marcus, vice president of communications at Terrapin Care Station, a national chain of cannabis stores founded in Boulder.
Many existing dispensary owners were vocal about supporting social equity applicants when the program first surfaced. But only 19 of the 206 store locations in Denver have a permit to have their product delivered by licensed social equity delivery companies in Denver, according to Escudero.
Benjamin Merriman is another social equity applicant seeking a cultivation or dispensary license. He was convicted twice for growing marijuana at his home, and like Diaz-Rivera, he has struggled to find a location for his new business.
He’s looking for angel investors willing to fund his cultivation business, which would cost somewhere between $3 million to $6 million, depending on the location. The only eligible spot that he’s found, so far, would cost $6 million to purchase, he said. The social equity program’s 1,000 foot-rule feels degrading, he said. “It’s like, ‘Here’s one bone out there for you folks and whoever gets it, we appreciate you, we respect you,”’ he said.
City leaders said they recognize low access to capital is another major factor keeping many social equity applicants from participating in the cannabis industry.
Walsh said her organizations’ biggest priority is ensuring that a new state social equity program to support marijuana businesses remains well funded. It would primarily help social equity licensees with loans for seed capital and ongoing business expenses, grants to support innovation and job creation and technical assistance. The program is funded with $4 million, according to the Colorado General Assembly website.
The new Cannabis Business Office will create new economic development opportunities, local job creation and community growth for the diverse population across Colorado, according to the Colorado Office of Economic Development and International Trade. The Cannabis Business Office will offer technical assistance and help with capital, which is important, Escudero said, because banks are prohibited from offering financial services to cannabis business owners because cannabis is still illegal at the federal level.
Denver Economic Development & Opportunity has also received 1% of city cannabis sales tax revenue per year for the next five years for the Cannabis Social Equity Technical Assistance program to reduce barriers to entry into the cannabis industry, and for the Small Business Investment Fund, which aims to level the playing field for small businesses in Denver, such as social equity applicants’ businesses. Social equity licensees and cannabis advocates say much more funding is needed.
When the Social Equity Program started last year, it included a rule requiring dispensary owners renewing their licenses each year to specify the ways in which they will advance social equity within their organizations, such as by promoting diversity in hiring and employment. City leaders cannot take action to revoke a license if cannabis leaders don’t execute on their stated equity plan. “But we put them on record and anyone can request a copy of those plans to hold organizations accountable,” Escudero said.
“I do wonder what happens to those things,” Marcus said. Terrapin Care Station has one store in Denver. “We answer them and then they just go somewhere with the city. There’s no repercussions for not following through. Companies aren’t getting fined. They’re not getting penalized. They’re not losing their licenses. So you want to ask, ‘What’s a good way to hold the company’s feet to the fire?’ I would be curious to know, what is our auditing and what are our repercussions for those who are making promises that they’re not keeping?’”
MORE: Social equity applicants meet at least one of three criteria listed on the city’s website. They must have lived in Colorado for at least 15 years between 1980 and 2010, in a ZIP code disproportionately impacted by the War on Drugs; have family member or legal guardian who was arrested for or convicted of a marijuana offense; or have a household income in the year before their application was sent that did not exceed 50% of the state’s median income.