San Jose’s cannabis industry has a diversity problem that starts at its highest levels. In a city where nearly six-out-of-ten residents are non-white, 14 of its 16 dispensaries have white owners and many of those have a mostly white workforce.
So when Caliva, the cannabis dispensary in San Jose that boasts its number-one-in-the-nation status, announced the company had hired cultural icon Jay-Z as its chief brand strategist “to work to increase the economic participation of citizens returning from incarceration — many of whom are not seeing the monetary benefits of legalization,” those referenced in the announcement rolled their eyes.
Daniel Montero, chairman of the San Jose Cannabis Equity Working Group, who was incarcerated twice for cannabis-related felonies during prohibition, says he hopes the announcement isn’t just a PR move.
— Caliva (@gocaliva) July 9, 2019
“Is Caliva just using this to push into the national market, or will it result in helping people returning from incarceration, not just get back on their feet, but return to society and into this industry with a job or a business of their own that can help them create inter-generational wealth?” Montero said.
- Other Bay Area cannabis equity activists, like Nina Parks who helped establish San Francisco’s program, were more harsh in their criticism.
“If Jay-Z wants to do better he needs to find the black and brown business owners that already have brands, who are looking to crossover into the legal market and are struggling to become compliant and nurture them as entrepreneurs and bring them into the national market,” she said, “instead of helping a company that is already very well resourced.”
Parks’ brother was incarcerated for cannabis in Rikers Island in New York and has plans to open a brick-and-mortar dispensary south of Market Street through San Francisco’s equity program.
She noted that this isn’t the first time that Jay-Z has jumped in as a soldier fighting to end the government’s war on drugs. He also made a video for the Drug Policy Alliance calling for cannabis legalization in 2016, when recreational adult-use was still prohibited in California.
But the way Parks sees it, the warnings the rapper makes in the video have come to fruition. Now that cannabis is legal for recreational use, the minority business owners who were part of the black market for decades are missing out.
In the video, Jay-Z warns: “Venture capitalists migrate to these states to open multi-billion-dollar operations, but former felons can’t open a dispensary.”
In Silicon Valley, venture capitalists don’t have to migrate. They’re already here. And cannabis equity activists like Javier Armas, who pushed Oakland to start the first cannabis equity program in the Bay Area, say it hasn’t removed all the barriers faced by legacy operators, who were and are selling cannabis illegally, to enter the legal market.
“Even though Oakland is the epicenter of cannabis equity, there are very few equity applicants who are actually in business,” Armas said. “Because it is so expensive in the real estate market and so difficult to cut through the government bureaucracy and they have to compete with the black market.”
And the real estate problem is especially acute in San Jose because dispensaries are restricted to a so-called “green zone” within some industrial areas in the city.
“We want the city to be more liberal with location, but the political climate is different in San Jose,” Armas added. “They are the most strict city in the Bay. And because it’s Silicon Valley, rents are astronomically high. So expanding the number of properties that can be used and the areas in which businesses can locate will make it easier for equity applicants to open after they get licenses.”
The city has plans to expand the green zone to the remaining industrial areas, including those covered by the North San Jose and Edenvale redevelopment policies as well as the enterprise zone in North San Jose early next year after it completes the land-use review process.
Cannabis industry lobbyist Sean Kali-rai, CEO of the Silicon Valley Cannabis Alliance, says opening up those new areas is also crucial because the City Council agreed earlier this year to allow existing cannabis businesses in the city to open second locations. That could mean as many as 32 total storefront dispensaries before a single equity applicant sells their first eighth.
The key to getting San Jose’s equity program off the ground is sustainable funding says San Jose State University associate professor William Armaline. He runs the university’s Human Rights Collaborative and fights for restorative justice for victims of the drug war in Oakland, San Francisco and San Jose, most of whom are members of a racial or ethnic minority group.
“We’re trying to re-shape a multi-billion dollar industry,” Armaline said. “It’s disingenuous for our political leaders to suggest that we should try to do that with a one-time payment and then withhold the seed funding we asked for.”
The City Council has prioritized its cannabis equity program for the upcoming fiscal year, but it still hasn’t been funded. And Kali-rai, whose clients include Caliva, says there’s no reason that it shouldn’t come from cannabis taxes collected by the city.
“Let the industry solve its own systemic race problem,” he said. “It all depends on the will of the council, but it can’t just be a one time thing. It’s got to be more sustainable than that.”
Meanwhile, the city is accepting applications for the first phase of its equity program, which includes manufacturing, distribution and lab testing — which are all allowed outside the green zone and within the other industrial areas. Phase two, which may include brick-and-mortar dispensaries, delivery services and social consumption, won’t be rolled out until after the expansion of the green zone.
And since the activists say most would-be equity operators in San Jose would opt to run delivery services, that is when the city can expect more diversity in its retail cannabis industry — with or without Jay-Z on the payroll.
Contact Adam F. Hutton at [email protected] or follow @adamfhutton on Twitter.