The Herb Column: Keeping on Track

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Davina Smith is manager of the City of Sacramento Office of
Cannabis Management. (Photo courtesy of Davina Smith)

On Tuesday Sept. 1, Davina Smith, head of
Sacramento’s Office of Cannabis Management, presented a plan to
the Sacramento City Council that she hopes will help set the
course for the department’s future. A key measure will look to
expand the reach of the city’s Cannabis Opportunity Reinvestment
and Equity Program, which is designed to help individuals and
communities who were disproportionately impacted by the war on
drugs.

While the CORE program has had some successes,
Capital Public Radio reports that “less than five” of the
city’s 30 dispensaries are owned by people of color, and none by
African Americans. On Sept. 1, the council delayed voting on
whether to award 10 new dispensary permits to people who qualify
for the CORE program.

If Smith ultimately succeeds in moving the department forward in
the coming months, she will have accomplished a significant
turnaround. When Smith took the job in January, the cannabis
office had been beset by tumult and scandal. Her predecessor, Joe
Devlin, who established the office and helped build an innovative
program that led the state, by most accounts, left his office
suddenly in May 2019. According to media
reports, Devlin was fired, but he claims he resigned the day
before his firing date.

Six months after Devlin departed, an investigation by
The Sacramento Bee revealed a scandal that made national
news. The Bee reported that one Ukrainian-born businessman, Garib
Karapetyan — whose partner had previously been indicted for
violating campaign-finance laws along with Ukrainian associates
of President Donald Trump’s personal lawyer Rudy Giuliani — held
eight of the 30 permits for dispensaries in Sacramento. The
city’s rules forbid ownership of multiple dispensaries by one
individual. It was later
reported by The Bee that the FBI was investigating
allegations that city officials had been bribed.

Smith, an attorney, worked on cannabis regulation as deputy
county counsel in Humboldt County and in the same position in
Solano County before coming to Sacramento. Her efforts to keep
her department on track and to turbocharge the CORE program will
be aided by $5 million in grants from the state’s
Bureau of Cannabis Control and the
Governor’s Office of Business and Economic Development.

Comstock’s spoke to Smith about how she thinks the still-young
local cannabis industry can continue to develop.

You’ve held a number of jobs at the intersection of
local government and the cannabis industry. How does the City of
Sacramento compare so far?

It’s been good. There are different groups within city government
that we interact with, and it’s nice to have their expertise and
the resources of their knowledge banks. We work on problems
together, and it feels very collaborative, which I appreciate.

What have been your biggest challenges?

I’d been in the office for about two months when we all started
working from home. That’s been a challenge because in any new
job, you’re learning the people and places, you’re going out into
the community and talking to people, and I haven’t really been
able to do that. … (Meeting on screens) can be good but not as
good as actual face-to-face. That has certainly been a challenge
in getting to know my team better and bringing us all together to
work on projects. But I think we’ve been pretty successful.

The other challenge is coming into the Office of Cannabis
Management at a time when there’s been a lot of change. Our CORE
program is taking off. We’ve been looking at code changes and
processing permits. We had established a deadline for many of our
legacy operators who didn’t have permits, and we managed to get a
lot of businesses permitted, which is fabulous.

You came into your job at a difficult time. Before
you arrived, there was a lot of controversy.

Anytime someone leaves a program-manager position — especially
someone who has helped set up the program and make it what it is
— it’s tough on the people who remain to keep things going. I
will say that the office did a fabulous job of keeping the lights
on and keeping the work going. They’re a great group of people.
They rallied.

It’s also tough, when you’re working hard, to have these reports
come out that you’ve been involved in wrongdoing. That’s hard to
take, especially when you don’t have the sense that was the case.
The fact that they were able to weather all of this says a lot
about their character.

The alleged wrongdoing you mention was a much bigger
controversy.

One result of the newspaper reports was a request by the city
council for the auditor to do an investigation. I’m looking
forward to that coming forward.

This program has evolved and developed the way it has, in part,
because of the sort of schizophrenia of shifting cannabis laws in
the state of California and at the federal level. The laws and
regulations have been in a constant state of flux. Having been in
Humboldt and Solano, I can tell you that a lot of people in local
government have been trying to figure out what to do. How do we
react to this? How are we going to regulate this in a way that
makes sense for our community? Sacramento is trying to do the
same thing. And when you’re trying to drink from the firehose,
there’s going to be some spillage.

Understanding this is all complicated, and
recognizing that the intentions of the City of Sacramento are
good: How is it that one person ends up owning eight
dispensaries? That’s a clear violation of the city’s
rules.

If you actually look at the individual who’s named in those
reports (Karapetyan), I don’t believe that individual owned eight
dispensaries. I don’t think that’s factually correct. That’s one
reason I believe it will be interesting to see the auditor’s
report. I don’t expect that we will agree entirely with the
report, but I certainly know that they’ve taken a deep dive into
documentation, not only from my office but from the City
Attorney’s Office, the City Manager’s Office and others within
city government. So I’m looking forward to that report.

We are struggling with the idea that we’re a capitalist economy,
and, therefore, people want to invest in businesses. We don’t
generally prohibit people investing in businesses. People
sometimes want to disinvest and leave a business. And how do we
allow this to happen? I think the city has considered how to do
that. And they were processing that because we want people to be
able to have the capital they need to operate their businesses.
They need to take on investors to do that. We allow that in
business all over — there is no proscription against that.

Cannabis is special because of the federal status, and because
it’s such a new industry. But there’s a reason to ask: Why are we
treating cannabis differently that any other businesses? The
city, not that long ago, clarified in the code that you can’t
have more than one ownership of a dispensary. So it’s crystal
clear. It’s a learning process. And if I’ve learned anything in
this industry, it’s that you have to stay nimble, because the
regulations are constantly changing.

What are the prospects for the CORE
program?

We’ve … been working on putting together a no-interest revolving
loan program for CORE members to start their businesses. We’re
trying to find the sweet spot where the monthly payments aren’t
too much for a business trying to get up and running but still
return money that can go to fund new loans.

It’s also very cool that the number of CORE businesses has more
than doubled since January. There are 15 operating now, and there
are 40 more in the pipeline.

Can you give us a quick report about the current
economic impact of cannabis in the city?

For the fiscal year that just ended, the city took in about $14.8
million in tax revenue. It’s definitely been a bright light. Tax
revenues for the city have not been great since COVID-19 hit, but
cannabis has continued on strong, which is encouraging.

Folks in the cannabis industry face unique obstacles when it
comes to capitalization. And, because their relationship with
banks is severely limited, it’s a cash-only industry, which
creates inconveniences as well as real danger. Is there any light
on the horizon that these structural issues will be resolved?

Well, with the federal election coming up, there might be a light
on the horizon. It’s an interesting position that the federal
government has chosen to take, because they don’t want to take
cannabis off the list as a Schedule I drug. They’re worried about
criminals in the industry, and yet by keeping it on that list and
prohibiting banks from being involved, they’re almost (ensuring)
that there’s going to be some criminal behavior — some shifting
of cash.

And there are going to be people leaving their place of work with
their paycheck — a pocketful of cash — getting robbed. … It’s
just such a ripe target. … It feels very much that the federal
government has abandoned the states and local governments that
have allowed cannabis. They want to be so hands-off that they’re
actually contributing to the problem. It makes zero sense. It’s
not logical.

What are you most excited about that’s on deck for
the near future?

Our CORE program was initially designed to be a two-year pilot,
and that two years will be coming up in April 2021. So we are
deciding: What do we want CORE 2.0 to look like? We want to go
back to the city council and make sure CORE is something that
continues. Not only for three more years but as an indefinite
program that continues.

The challenges, of course, are the economic environment. The city
doesn’t have the money it did when CORE started. So I’m really
hoping we can get additional grants from the state. It’s an
exciting time. At this moment, it looks like our businesses are
doing well, so I’m hoping we can continue that trend —
normalizing cannabis in the city of Sacramento in the state of
California and improving the industry.

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