Oakland council calls for changes in pot permit equity program

Ron Muhammad speaks during a special meeting about cannabis at Oakland City Hall in Oakland, Calif. on Monday, Nov. 14, 2015. The Oakland City Council held a meeting to hear a handful of proposed cannabis laws including a controversial 25% tax on profits made by cannabis businesses. less Ron Muhammad speaks during a special meeting about cannabis at Oakland City Hall in Oakland, Calif. on Monday, Nov. 14, 2015. The Oakland City Council held a meeting to hear a handful of proposed cannabis laws ... more Photo: James Tensuan, Special To The Chronicle Photo: James Tensuan, Special To The Chronicle Image 1 of / 8 Caption Close Oakland council calls for changes in pot permit equity program 1 / 8 Back to Gallery

Cannabis experts and their allies packed Oakland City Hall for a raucous public hearing Monday night, at which the City Council voted to re-craft a set of controversial pot laws it passed in May.

After a four-hour debate, the council voted 4-3 to direct the city administrator to write new laws and significantly revise an equity permit program that sets aside half of Oakland’s pot permits for ex-convicts and a small number of East Oakland residents. Its members also scrapped plans to force cannabis businesses to hand over 25 percent of their profits to the city, and to require pot retailers to pay back taxes and hefty $10,000-a-day fines.

The vote fell along political lines, with council members Dan Kalb, Annie Campbell Washington, Rebecca Kaplan and Abel Guillen in favor of changing the program, and council members Desley Brooks, Larry Reid and Noel Gallo dissenting. Councilwoman Lynette Gibson McElhaney was absent.

The council also requested a comprehensive analysis from the city’s Department of Race and Equity before the laws come back for a vote in January.

Although it was approved unanimously, the equity program sparked a six-month political fight that has all but hobbled Oakland’s marijuana permitting efforts. Sponsored by Brooks, it reserves half the city’s permits for people who fit a narrow set of criteria: either they were jailed on marijuana convictions in Oakland within the past decade or they have lived for at least two years in a designated East Oakland police beat that saw a high number of marijuana arrests in 2013.

The six designated police beats in the equity program are either in Brooks’ district or the district represented by her ally Reid.

Brooks said the intent of the program was to benefit people whose lives were disrupted by drug-related prosecutions and incarceration. Without special set-asides, she said, “we’re setting up systemic issues that prevent people from competing.”

Critics say the program is too restrictive and would choke off the city’s pot trade amid an anticipated boom, now that California voters have approved Proposition 64, the ballot measure to legalize recreational pot in 2018.

After hearing these arguments, several council members expressed regret for the May vote, and three of them — Kalb, Guillen and Campbell Washington — pushed an alternative proposal that would offer loans, tax incentives and expedited permits to perceived victims of the war on drugs, without constricting the industry and the tax money it could bring. They asked that this alternative be the framework for the new laws in January.

Brooks, Reid and Gallo shot back with proposals that would tighten the city’s grip on its cannabis sector. In September, they pushed plans to force all pot businesses to hand over 25 percent of their profits, and at least one seat on their board of directors, to the city. On Monday, they floated a plan that would force large-scale businesses to pay back taxes, plus interest, and $10,000-a-day fines for every day they have operated.

“Under federal law (cannabis) was illegal,” Brooks said. “We don’t typically reward illegal activity.” The other council members refused to sign on to the plan.

Speakers at the meeting were infuriated by the ongoing squabbles and delays.

“Your politicizing of this process has been shamefully negligent to the citizens of our city,” said Michael Grafton, a cannabis advocate. “This is a race, and the consequences of your machinations is that Oakland is stumbling out of the starting” gate.

Other speakers said Oakland is in danger of losing its reputation as one of the most cannabis-friendly cities in the U.S.

“In the context of repression, prohibition and confusion at the state and federal level, Oakland made it work,” said James Anthony, a lawyer who helps fledgling marijuana entrepreneurs start their businesses. He noted that in 2004 Oakland was the first U.S. city to issue a permit for a medical cannabis dispensary. Now it has fallen behind other cities in the region.

Yet some praised the equity program as a means to correct past racial injustice and prevent African Americans and Latinos from getting left behind once the industry goes above ground.

As council members bicker, time is running out for Oakland. State law requires that all cannabis businesses have a city permit and a state license by January 2018, and many other cities already have permit systems in place. Some operators who spoke at the meeting said they may have to flee if the May laws remain intact.

“My business does not want to leave Oakland, but the equity permit program in its current form would create an impossible situation for us,” said William Roberts, a lab manager at the East Oakland cultivation facility Dark Heart Nursery.

Kalb said he shared those concerns.

“With Prop. 64 passing, and other cities looking to do things, we have a time-sensitive goal to get things done here,” he said.

Rachel Swan is a San Francisco Chronicle staff writer. Email: rswan@sfchronicle.com Twitter: @rachelswan