Meeting Transcript

Aaron: We just ask that if it’s time for you to leave and if you’re heading out, please do so quietly. Try not to be too loud outside because likely this is going to go after eight and people have some questions that they want to have asked and answered and it tends to get really loud outside if everybody congregates. So please be respectful of the process. And with that, we’ll hand it over to Hezekiah, not gonna leave you up here, I’m gonna sit up here (laughter) awesome. I mean I’m stoked about having all this [00:00:30] table space. (laughter)

Hezekiah: Aaron, thank you so much for the work that you’re doing and to all of the volunteers, to mentor to chapter up here. And to all of you guys, this is awesome. Happy Wednesday and I’m thrilled to be here to talk about all of the latest goings on in Sacramento. I am fresh from Sacramento today. I got out of town after, you know, nine meetings, four of which were scheduled within a 15 minute. It’s one of those times when [00:01:00] everything is happening very quickly so, I do want to just take a moment to acknowledge that everything we’re gonna talk about today is gonna change before the next time we talk about it and it’s gonna change very quickly.

I’m gonna do my absolute best to provide you a snapshot of where things are and, you know, really try to leave as much time as possible to talk about the things that you all would be most interested in. Goodness, with that, I think I’ll just dive into sort of the three major things and so, you know, the regulations, [00:01:30] uh, everybody know that the three licensing agencies that were tasked with licensing commercial medical cannabis activity last year released their regs on Friday. Rightly, we all know that. So, those are the regs at this point, the three sets.

We also have the governor’s budget Trailer Bill which is seeking to bridge Prop 64 with the Medical Act. That looks like this and then we have 62 [00:02:00] pieces of cannabis regulated legislation that are moving through the legislature. These will be done by January. This is the guidebook for how you get licensed. These will decide, you know, to the question, that David just asked, I believe these will decide whether medical and adult use are separate and any number of other things about how Prop 64 will be reconciled with the over the MCRSA and these laws are about all sorts of topics. [00:02:30] 62 bills with all sorts of different things.

So, I know the regulations are really the primary focus today. Um, with the amount of time that we have it’s gonna be really difficult to get into too much detail here. So I’m gonna keep it very brief, touch on each one and then just start with that and we’ll go from there. The regulations, the previous conversation I think touched on some of the biggest concerns that we want to start there. The prohibitions on manufacturing products and prohibited products [00:03:00] in general, I think present the most immediate tangible challenges to our community. There are a number of things on that list that, that, I think we could talk about that ultimately will need to be improved.

I always like to talk highlights. Tiered fees and licenses, the idea that the bigger a business is, the bigger its volume, the bigger its production, the more the fees should be and the more onerous the requirement. We knew that was going to be a feature of the cultivation licenses because cultivation licenses are tiered [00:03:30] in statutes. But it’s really exciting to see those same concepts applied to the other licensing agencies even though they weren’t necessarily required to do that. That is the highest and maybe the lowest.

But before getting into a few of the other points, I want to explain exactly what these rules are in the context of where we are. So the statutory authority that is the authority that’s in law, so the legal authority [00:04:00] to write these rules is only the MCRSA. None of Prop 64 is considered at all in these rules. It’s only the medical regs and so the question of what will happen to these regs is a very real one because the Trailer Bill that the governor proposed, the Budget Trailer Bill that the governor proposed back in January where budget proposed in January, Trailer Bill proposed last month. We’re expecting a revised Trailer Bill really any day now.

[00:04:30] The Trailer Bill currently proposes to repeal the MCRSA in its entirety. In which case the authority with which the regulatory agencies wrote these regs goes away. And they’re revoked in their entirety. And so instead of having a public comment period on these regs where we will give our comments, by the way, the deadline is June 12th to comment on these regs. Regardless of what happens, it’s still really important [00:05:00] that you comment and by the time I get done with this, I think it’ll make sense why.

If the Trailer Bill does successfully repeal the MCRSA, these will be revoked and all of the comments that were submitted to them will technically be revoked as well. However, the rules that will, the regulations that will be written to implement the Trailer Bill, the budget Trailler Bill will pass in June 15th. That’s the constitutional requirement to pass the [00:05:30] budget. If that happened, the agencies would not have enough time to go through the whole public comment period that’s required for the regular rule making process. These are regular rules.

There’s also the emergency rule making process in California. And so the emergency rule making process, the agencies hand us this like they did on Friday and say these are the rules, get to work. And public comment comes after the fact. And so, that [00:06:00] is, I think in all honesty, the likely outcome. I think that at this point, the likely outcome is that the Medical Cannabis Regulatory and Safety Act will be repealed and it will be replaced with a modified version of Proposition 64 and we’ll see exactly what type of modifications will be made. There is obviously a lot of conversation which we’ll talk about in a little bit more detail in just a moment.

So, it might sound [00:06:30] like commenting on and reading these rules and regs is less important. But it’s not at all because in the absence of the full comment period, when the agencies and they’ll be the same agencies, the same staff, that won’t change. When they go to write the new rules, they’re going to start with all of the comments they’ve received on these. Those will essentially become scoping documents.

And so scoping documents, these, they will be formal, legally binding scoping [00:07:00] documents. But usually scoping documents sort of say, hey, these are the things we’re gonna talk about, these are the things we’re not gonna talk about yet. The comments they receive on these and the feedback on these rules will be the, the starting point for the regs that would implement the now combined statutes. And so, shifting from that, I hope that makes sense, um, if any clarifying questions on … yes.

Speaker: No more [00:07:30] distinction between medical and recreational?

Hezekiah: The perfect segue. That’s what we’re gonna move over to right now is that question. So the question was distinction between adult and medical. And so, the, the governor’s Trailer Bill, in January we got the first glimpse into how Governor Brown was going to approach this challenge. You’ve got two different trains on similar tracks but ultimately not the same track.

Are we gonna try to put the trains on the same track, two track, what the heck is gonna happen? In January the governor told us that two tracks [00:08:00] on two trains is too expensive. Duplicative, we’d end up paying for the same things twice. We’d have ultimately too much cost to the, the people of California. So the governor’s highest level goal in the budget Trailer Bill this year is to bring the two together. That is to create one unified rule set that will govern both adult use and medical.

Now, of course the irony of this is that the proposal to force licensees to either choose [00:08:30] adult or medical as currently proposed, from our perspective would essentially negate the cost benefits and so, it’s, it’s a very interesting way that they’ve chosen to go about them. In general, the budget Trailer Bill is Prop 64 with some pieces brought in from the medical cannabis regs and interestingly enough, there are a few pieces that were struck from the Trailer, or Prop 64, with, [00:09:00] we’re not really quite sure why. And so, the biggest piece that’s going to come from the medical regs into Prop 64 as currently proposed, is the limitation on cultivation scale.

The idea that a person could only hold up to an acre or at part that, up to four acres. This is contained and articulated here in the regs. The statutory authority for those regulations is also included in the Trailer Bill, so [00:09:30] that limitation is likely to be one of the major components that comes from the medical laws into the combined laws and ultimately becomes part of the broader conversation. Most concerningly from our perspective, there are two provisions that were included in Prop 64 that are not included in the Trailer Bill. There’s so far no explanation as why. The first, um, actually there is an explanation as to why; I’m just not satisfied with the explanations. (Laughter)

So, [00:10:00] there, there is one, but just to be totally accurate there is an explanation and I will provide you. Prop 64 included residency requirements that offered priority licensing to California state residents. This is not constitutional. It is a violation potentially of the federal constitution but most definitely a violation of the California State Constitution. Because of that, the governor opted not to move forward with it and it is repealed.

Personally, [00:10:30] I think maybe this is one of the special circumstances where we should give ourselves a few years. Um, that said, there is a rationale there. We do have legislation, over in this stack. We do have a bill, AB259 which is authored by Assembly member Mike Gibson out of L.A. It is co-sponsored by Cal Growers and the California Minority Alliance and it would restore those residency requirements. So even if the governor does repeal it here, [00:11:00] at the very least, we’re gonna make him veto them again in September.

That bill is currently, not only would it expand the residency requirements in Prop 64 to cover medical. In the off chance that we do end up with two marketplaces which I want to caution people, there is a very real possibility that at the end of this year we do still have two systems. That is a very possible outcome. If that is the case, AB259 [00:11:30] would apply residency protections to both and ensure that both marketplaces enjoyed those protections. The second thing it would do is extend them out to 2023, currently expire in 2020. We figured a few more years for Cali businesses isn’t the worst thing in the world.

The second and I think more concerning and ultimately the reason why our organization did vote to take an opposing “let’s amend it” position on the governor’s Trailer Bill is provisions that would ultimately strike, and I’m gonna [00:12:00] get super technical, but it would delete; it would strike Section 26051 of the Business and Professions Code. This section of code require that a licensing agency, before issuing or renewing a license would consider factors such as whether or not issuance of the license would lead to a number of things.

Like monopolies, unfair restraints on trade, environmental damage, sales [00:12:30] to children, out of state sales. A number of things that I think are universally agreed that we should be moving away from, except for maybe sales to children, especially in medical circumstances. I do always like to note that I’m not really a complainer of the children’s’ issue in, in medical cases where it’s well warranted and governed.

Nonetheless, these are common sense provisions that Prop 64 included. They’re very challenging to implement. How exactly does a licensing agency determine whether or not issuance [00:13:00] of a license is going to create a monopoly? That’s a very difficult question to answer. We understand why the Trailer Bill removed them. The Trailer Bill’s goal is to make it cost effective to implement the law. That’s really what the purpose of the Trailer Bill is. It’s a, it’s a piece of legislation that helps laws fit into the constructs of a budget.

And so it’s about implementation and we understand it is going to be difficult to answer those questions. We also think that the voters of California supported Prop [00:13:30] 64, it included these provisions and the voters of California and the businesses of California deserve the protections that were included in that piece of legislation. And so we will be remaining opposed to the governor’s Trailer proposal until such time as at the very least provisions that protect against monopolies are adequate to provide our community of business a path forward.

Audience: [00:14:00] (cheering and clapping)

Hezekiah: Thank you. Those are the major pieces framework-wise on the regs and the Trailer Bill. And then of course we do have our normal session, our legislative session. There are quite a number of bills here. There are a few of them that are priority pieces of legislation that I’d like to brief for you. And then just open it up, and, you know, wherever you guys wanna go with it, I’m really just roll with it.

Highest priority piece of legislation from our perspective is the Assembly [00:14:30] Bill 1410, introduced by Assembly Member Wood and Senator McGuire, both from the north co- coast. This bill would allow for a cultivator who would rather work with a distributor to pay their taxes. They could offset their tax remittance until after the product has left the farm, been processed and ultimately been tested and entered the marketplace. And so it will provide a lot more flexibility with regards to ensuring the cultivation tax [00:15:00] didn’t pinch small operators who don’t have cash flow, don’t have the, the available resources to cover it. Is, is that like a time limit of uh? Okay, gotcha. I freaked out for a second there. A refill.

Audience: (cheering and clapping)

Hezekiah: Um, that’s encouraging.

Audience: (cheering and clapping)

Hezekiah: So AB 1410 (laughing) is high priority legislation. It is sponsored legislation. We are continuing to advocate [00:15:30] that the governor fold that into the Trailer Bill. There is an advantage in the Trailer Bill and that it goes effect immediately in June 15th. The budget has to be passed by June 15th. So, getting this bill passed, getting it into law so that when the Board of Equalization comes out with their rules, which by the way they’ve just scheduled their hearing, I believe it’s in September. Uh, the Board of Equalization will issue a rule set as well. We want to be sure that that legislation has made it into law so that they have the statutory [00:16:00] authority to implement what we are hopeful for.

Very high priority piece of legislation. Of course AB 1578, this is the sanctuary state bill for cannabis if you will essential defund global and state law enforcement agencies from working with the federal government in the enforcement of any cannabis crimes. I’m very encouraged to support that bill. That bill is moving very quickly through the process. Senate Bill 175 is a bill from Senator [00:16:30] McGuire. Currently it is illegal to use the name of a county in your branding if the product wasn’t grown or produced in that county.

Audience: (cheering and clapping)

Hezekiah: You know, San Francisco rule. Like I used to hustle too and I have San Francisco, I have Humboldt, I have Mango and they were different flavors so in different brands, everybody do. It was all good and so being able to preserve the integrity of those brands is currently protected. However, what Senate Bill 175 would do is extend [00:17:00] those protections to include words that are intended to mislead. And so if there are words like Humboldt minus the “Boldt” which is, you know, an example of a brand that has emerged. Not picking on that company. They do currently produce in Humboldt but a big company wanted to SF for example. SF might really lead people to believe that San Francisco, you know, like SFOG, you can’t do something that’s meant to mislead also.

In addition we are [00:17:30] working with the senator here to expand the appellations provisions. So an appellation is something that is defined in such a way that in can be challenged with the force of law. So if you say it’s from Nava and it’s not you better believe you are not going to get your pro- market your product as from Nava. So that’s cool. In current law there are appellations for regions of origin. We would like to that to also include standards practices and [00:18:00] variables.

And so if you are a carbon neutral SF grower, carbon neutral should be defined and you should get to realize the value of using those standards in your growth. If you are a hand trimmed, you’re creating good jobs for people. Instead of trimming machines you can certify hand trimmed and get a premium for that. And so by expanding the scope of the program we would be able to include a lot more of our culture and our heritage. And so [00:18:30] we are amending that bill to move in that direction.

Speaker: Hetch-Hetchy grown

Hezekiah: Hetch-Hetchy grown. There you go.

Speaker: Working on that.

Hezekiah: Those are the three high priority bills we have. We have another eight medium priority bills, about seven more low priority bills. Every one of our priority bills we do we submit written and/or verbal comment in all of the committees and there is just so many things that go into it but I feel like at this point I’m going to listen while you ask and then we’re going to go from there.

Aaron: I’m going to quickly charge in. [00:19:00] Uh, just, just to discuss one thing that I know, uh, as, as local operators and as we’ve been, uh, focusing on our local alternative question I think has a lot of rele- relevance as far as the governor’s Trailer Bill is concerned. Um, for a long time here in San Francisco and I think in a lot of cities and counties we’ve been hyper focused on making sure that we have local permits and licenses by 2018 because, uh, the way the MCRSA is written you have to have that localized affirmative [00:19:30] hand in order to acquire for a state license.

It does look like, um, part of the reconciliation that’s going on with the governor’s Trailer Bill is going to change that language so that it is defined as, as long as it will operate but it’s not in violation of a local ordinance. You can apply for that state license even if your city or county has not actually finished their process. This is huge for a lot of localities and municipalities [00:20:00] who are going to take a year or longer to create these licensing, uh, and, and, and permitting schemes, uh, and so I thought maybe you could just clarify that a little bit for us because that is gonna change the priority for a lot of folks. There is a part deal, the CEQA and …

Hezekiah: Certain, yes, this is not a simple question. Thank you for that though and that there is a very accurate summary. So MCRSA and [00:20:30] precisely for disagree with regard to threshold of local control. MCRSA requires a local permanently issue to a business before they are eligible to apply for a state license. Prop 64 requires that an applicant shall be eligible if they are not operating in violation of a local ordinance. It actually prohibits the state from asking for your permits. [00:21:00] So the changes that are proposed here are the very it does not change the underlying framework.

If you are not in violation of a local banor a local permitting ordinance. If there is a permitting law ordinance and you don’t have a permit that counts as being in violation as well. Um, but for, for folks that are in counties that aren’t done yet they are working through the process, they have an expressly ban or maybe [00:21:30] haven’t even expressly taken up non retail activities as at all. Provided you are not in violation, you will be eligible to apply. What it does to and so and this is actually, the, the question in CEQA.

How many people in the room consider themselves CEQA experts? How many people in the room know what CEQA is? Okay, (laughter) CEQA is the California Environmental Quality Act. It is intended [00:22:00] to prevent, protect not prevent, protect the natural and human environments, so cultural resources are considered, view sheds, water quality, air quality. I believe there is, up to 36 considerations now that if a project and in this case a project can be either hey, I wanna build some greenhouses. That’s a project or hey, I’m in the county and I want to pass on ordinates that will allow people to [00:22:30] build greenhouses.

So right now what is happening is as the counties or cities are going around and passing the ordinances they become the lead agency for CEQA compliance. What that means is that they need to, excuse me, they become the responsible agency. They are the ones responsible for CEQA compliance. That means they have to prepare a CEQA document. There are several of them from an EIR, and Environmental Impacting Report that [00:23:00] makes my stack of papers look pretty small. These are hefty documents. I’ve worked on some I believe the cheapest CEQA EIR that I worked on 70,000, the most expensive that I’ve worked on 1.4.

There are CEQA documents that go into the several million. The counties become the responsible agents. If they pass an ordinance that said we are going to permit you to do these things they have to do CEQA and demonstrate that the permits they’re issuing are not going to cause significant [00:23:30] negative impacts to the environmental quality of the state of California. In the absence of a local permitting ordinance which is what we’re talking about now, folks who don’t have a permit but are not operating in violation of the project proponent becomes the responsible agency.

So if I want to get permitted to grow in a county that doesn’t have a certified CEQA document, I have to be that CEQA document. There are a few options here, the individual [00:24:00] project proponent and do the CEQA. Sometimes that can be streamlined and affordable, sometimes that could be impossible and it’s that’s it. The other option is what is called the problematic EIR. This would describe under state law describes a certain type of activity or certain activities that occur within a contiguous geographic area.

You would analyze those activities like say cottage cultivation, if you do this thing, this thing and this thing, there is no possible way you’re going to cause an impact. You could then [00:24:30] certify all of those applications that were in that category or that geographic area. And so there is a number of ways that we can navigate this. I’m 80% sure we’ve crossed the threshold where the proposal in the Trailer Bill will become law which means that there is more, you know, friendly approach will remain in effect. If that does happen in June we will circle back around very quickly to approach [00:25:00] correct, you know, explore collaborative strategies for meetings CEQA compliance.

Aaron: And then our priority goes from making sure that our localities have a permitting and licensing process to, in interacting with them to create some type of CEQA compliance that is usable for local operators. I, I like that but let’s go ahead and, and, and move into the questions.

Hezekiah: You know I started working here with [inaudible 00:25:22] over there so what do you know.

Speaker: I just I’ll take a look …

Hezekiah: All right, let’s talk about sequencing.

Speaker: We arbitrate [00:25:30] on that and I think [inaudible 00:25:34] they’re very admirable little administration federal level through, uh …

Speaker: Taking up on yourself [inaudible 00:25:41]

Speaker: The bill has actually gotten support from [inaudible 00:25:44] and objections recreational.

Hezekiah: Yeah.

Speaker: If we were to [cough] lower the 221% threshold, I mean and more importantly if you have any idea in my mind that would lower make that a reality?

Hezekiah: Sure so question [00:26:00] basically, uh, we’re trying to get adult use and medical under the same track. The federal administration, uh, is not necessarily thrilled about adult use. They seem reasonably okay with medical. Implication is about combining the two onto the same track. I tell you the complete HS candidates that is why the governor’s administration has proposed what they have. We communicated with them very directly that if our members were forced into a one size fits all marketplaces they probably [00:26:30] wouldn’t participate.

Most folks right now given where the administration in DC has most folks that I work with would rather be able to distinguish themselves as medical only. Have the option of doing and so where we think that they got it wrong was by forcing the business to adopt one or the other. I think it’s very important that the businesses are given the ability to choose if they want to but not before it’s too late. So we are working with them on the specific revisions to try to [00:27:00] ensure that the option is there but it’s not mandated.

With regard to the actual forecasting of what risk there is [Rebecca Ford 00:27:09] did pass. Medical enforcement is defunded for a few more months at least. I have no reason to believe that that would change in the foreseeable future. However, the [inaudible 00:27:21] amendment which would have done the same thing defunded for medical, adult use enforcement did not pass. It’s not dead yet per say. There [00:27:30] is the possibility that it will be up for debate and deliberation in the next 10 days or so.

But from a bare bones tactical perspective, it is likely the attorney general sessions will have funding to enforce adult use, will not have funding to enforce medical. How that plays out, what that means I think we’ll, we’ll wait for core memo 2.0 to decide exactly what that means but, but my expectation and forecast is that at least for this calendar year [00:28:00] there will be money for enforcement of adult use.

Speaker: Thanks very much [inaudible 00:28:07] I wanna extend that question that was asked is the question that I’m also with again specifically in tax. So will become singularly taxed. As you know [inaudible 00:28:20] USA there is a provision that if you wanna take medical [00:28:30] cultivator running a different tax routine, in the combination the two tracks or one track might be going around to do [inaudible 00:28:47] in a sense selection of that opportunity to avoid exercise tax in medical.

Hezekiah: Um, that was really loud (laughter) Sorry about that. Question was about taxes. Differing visions and [00:29:00] taxes between the MCRSA Prop 64 as we combine the two what is our ability to, to recognize or realize those two visions I suppose. Um, first and foremost I really have to correct you only slightly to say that the vision for medical tax exists but since we did not successfully pass 82243 last year and it was never signed into law, we never managed to hook that caboose up to that train.

And so what we got is one train without a tax program and one train [00:29:30] with a really messed up tax program. Um, and so the, the question is less about can we merge those two visions in my opinion and more about what ability do we have to amend and modify the tax program that was included in Prop 64. The, the unfortunate answer is not much. It’s gonna be about 10 years till we can make real substantive changes to it. Things like how the money is spent. That’s really the motivating factor for getting votes in the state legislature.

The state legislature requires [00:30:00] a two-thirds majority to pass a tax. If you don’t get to allocate some of the funding it’s usually really hard to get there to make those changes. So statues really in the legislative side not a lot. Prop 64 does include some interesting language which we’ve been exploring with the Board of Equalization. The Board of Equalization is of course our tax board in the state of California responsible for sales tax collection and a few other taxes, exercise taxes.

They are tasked with administering and implementing the [00:30:30] medical cannabis the marijuana, excise tax which includes both the cultivation tax and excise sales tax. They apply to all licenses, notwithstanding distinctions between adult use and medical. There is very little we can do about it except this interesting provision, it says that the board may from time to time establish new product categories and separates accordingly. And so our vision is hey, this is a compassionate use product. That’s a new [00:31:00] category.

Compassionate use products are exempt. This is a cottage grown product. Cottage grown products have a reduced wage just like micro brews do. You know this is a, whatever, you get the idea that we may be able to. So that would be over here in this stack on the regulatory side. That’s gonna be the September hearing when the Board of Equalization offers their first draft of rules for public comment.

We have started the process of communicating with them, about this idea of categories. [00:31:30] We think that that authority that was created by Prop 64 may be able to be, leveraged in such a way that it could resolve in the, the vision that you articulated of a really low tax rate for compassionate, lower, lowest for cottage moving up into the more commercial adult use and that’s really our vision and I think, you know, the vision that, that we’re trying to vote.

Speaker: [inaudible 00:31:55]

Hezekiah: Yeah, uh, yes okay.

Speaker: People who work [00:32:00] with Berkeley we would like to tell you how many flowered. They have pesticide, more testing and more extracts pesticides test. What’s the safe position or at least in your view what’s the safe position of testing requirements, testing limits. How am I going fund this?

Hezekiah: Yeah, um, the question about testing, testing limits, um, and, you know, specifically I’ll just mention you, you mentioned Berkeley’s regs and, and I’ll just say that I think Berkeley’s regs on the pesticide side we can work with those. Berkeley’s [00:32:30] regs on the microbial side totally off based and not scientifically based and, and frankly I think that the opinion I just expressed it’s similar to what the state regulators are seeing. Of course we didn’t see chapter five in the initial release of the regs. Those will be released we’re expecting this Friday.

So we’ll get to see specifically what they’re thinking. Um, pesticides I think will be a very little pressure, perhaps an absolute, you know, any presence is available. So do not spray pesticides, don’t [00:33:00] get clones from folks that use systemic pesticides that can go generational. There are a number of them that can do it. If you don’t now actually I’m going to give a shout out to the folks select out there with the big pens, they’ve got the posters in the corner. They got a great job of helping growers at Oregon. The Oregon the regs they’re doing a really good job of hitting, um, California growing. Pesticides don’t use them, California department of pesticides cannabis.

Aaron: You’ll get a list of these [00:33:30] ingredients as you’re gonna get.

Hezekiah: Yes.

Aaron: It’s pretty comparing.

Hezekiah: On the microbial side I’ll expect will see a lot more legal room. Uh, you know, for example Berkeley is testing at the genus level. At the genus level it’s impossible to tell if a bacteria is a harmful or beneficial. Eco way is for example is one genius of which there are a few harmful, uh, sub species. There are also several beneficial sub species that are actually some of our most valuable organic pest management, uh, as [00:34:00] treatments. So it’s very important on the microbial side. We’re going to move to science demonstrable arm but I think on the poison side we’re just going to assume that the presence of a poison is a demonstrable arm. Frankly it doesn’t sound like the worst thing in the world so, um …

Audience: (Clapping)

Hezekiah: That’s you know, that’s my expectation there. It will be very interesting to see chapter five. We’ve been, you know, we’ve been working with pesticide regulations pretty closely on, on their exploration process and then the microbial stuff is, it is extra science. I mean it’s gonna [00:34:30] take some likes, there is no doubt. Um …

Speaker: How do you, how do you expect that to affect the marketplace? It’s so unavailable.

Hezekiah: You know, I think we’ve got, finding a product in California. I think we’re going to have to do a better job of meeting each other and, you know, the good, good, the folks growing clean product are gonna meet the manufacturers that wanna make clean product and then consumers that wanna buy clean product. We’re gonna have to close the loop and make sure that the folks who, you know, are invested in this, in this industry that we all envision sustainable clean, those folks need to know each other top to bottom. [00:35:00] I think there is plenty of product in California. I mean like there is a lot of room here, a lot available.

Audience: (cheering and clapping)

Speaker: So again we’ll try, we just have to put the right weed on the right shops.

Speaker: Just for like small growe- growers, um, when they are aiming to get license or applying for license which you know it’s gonna approve your license, you know, say Friday, so a lot of growers would really push on a little bit to submit their but maybe, um, a little hastily, maybe not waiting for, um, some of these regulations and some of the inspections that are gonna follow suit.

What do you advise [00:35:30] in the absence of some really strong advice or any regulation committee that’s ironed out anything specifically? I think I have my plans, you know, a good thing based [inaudible 00:35:38] officials and being involved in type of all those, people that are the decision makers and letting them know who you are is kind of the best tool to apply for the professional and the consulting world but maybe you can speak a little bit more to that on the regulatory side?

Hezekiah: Sure and so I’m gonna paraphrase here sort of a question about balancing timeline [00:36:00] and getting the application in on time and expeditiously versus being complete and thorough like dotting every I crossing every T. And, you know, out of balance those two considerations and absolutely, um, you know, and I, and I think that, that I would, I would really think thorough with your advice. You know being known, introducing yourself to your local policy makers, your local regulators, very, very critical.

Well, here is, here is the power exchange that’s taking place. The state is going to offer [00:36:30] us normalcy and legitimacy in exchange for commitment that we are going to comply and follow the rules. We need to be identifiable and verifiable. If they are going to get their end of the bargain and so being a part of that solution is ultimately the best way to, to build the trust and the confidence we need to move forward together. So get on the radar, um, and, and I think that the honest truth at the state level, uh, the tail end of the question was how to navigate your spot on the upper level.

[00:37:00] How to navigate this at the state level is by the time you get into the state, what you’ve gone through at the local level is going to … The, the state challenges will pale in comparison to what folks have gone through at the local level. And you know, I think that’s a word of maybe, I don’t know, a word of encouragement that like what you’re dealing with now is more onerous than what you will deal with, with the state licensing agencies. What you’re going through at the local level, needless of the level [00:37:30] that is where you’re being vetted on the really hard criteria. If you get to the state you’re probably all right. I will get that up here as quick as possible.

Aaron: And I just wanna add to that too and, and, and this, this goes back to the last meeting that we had. Um, goods get in with the Board of Equalization, your business license Uh, you know some of these basics that I think are sometimes lost on folks because they are so busy building their businesses.

That’s one of the first things that I believe the state is gonna look at, that good state which really [00:38:00] had, had that Sawyer’s permit, invoicing, a lot of the basics that Patrick was able to talk about under the CPA and professionals who will help guide you onto these business practices about invoicing your dispensaries, making sure you had your seller’s permit, your temporary seller’s permit, making sure all of these verifications are going on.

That packet and that good standing and pay your taxes is going to be absolutely crucial in making your case and it does seem like when the state kind of bottleneck is gonna happen cause how many applicants are bringing in and [00:38:30] out? Anyways (laughter) Won’t ask you the answer of that. You, it’s, it’s almost an alternative for the first of all model case by case basis and so create that paper trail being as much compliant as you can, hire that administrative person for you to do these things.

Speaker: And for those that anticipate that sunset I know, not like specifically but it’s gonna happen in June right. Like you’ve done your due diligence until June 1, I’d say by June 1 that’s your kind of getting stopped by the Fed but by June 1.

Aaron: [00:39:00] I think we need to get the Mendel growers alliance meeting on the calendar and talk about that somewhere.

Speaker: Okay.

Aaron: Yes, a lot of things going on in Mendel. Um, hey, you guys it’s after eight. You’ve all been very patient hanging out actually.

Speaker: You can continue.

Speaker: I’m gonna stay here and keep doing this but for folks that do have a scheduling commitment need to get out. Appreciate you, thank you for coming out. We’re gonna [crosstalk 00:39:22]

Speaker: But we, we have to [inaudible 00:39:23]

Aaron: I know. I’m acting like we’re gonna go behind this gentleman behind this lady for a while so please.

Speaker: Here is a section of some of the manufactures like [inaudible 00:39:27] It seems like they didn’t really create hazard less great relation in terms of [00:39:30] like what to access organisms. It seemed like they just had to clear out anything that …

Speaker: For a food commercial.

Speaker: Great and so that’s somebody who makes cheese and somebody who makes ice cream are both very [inaudible 00:39:55] kind of wiped down my entire …

Hezekiah: Yeah.

Speaker: So yeah, is there leeway, you offer something like that I mean.

Hezekiah: [00:40:00] So the question was about manufacturing specifically the prohibited products and from, you know the, the folks perspective. From their perspective they’re, they’re out of business. Everything top of the table is actually, um, from what I hear. So, um, the, you’ll notice that or maybe you noticed I probably noticed that the [inaudible 00:40:24] proposed a new license type, an infusion license type. That wasn’t in statute two years ago. Two [00:40:30] years ago there was nobody advocating for a food maker or an infusion, uh, infusion company.

The reason that delays us so bad is because you guys are aren’t organized. And I’m not singling you out specifically but the food maker segment of the marketplace is not organized, it’s not on the table, it’s not coherent and it’s there is a void there. You know I do what I can for congress and policy across the board. Our primary focus is on growers. We’ve got a lot of in factors where we’re doing what [00:41:00] we can. It is going to get better but very slowly and organizing is the way to get it done faster.

I have been directed by our chair to start the meeting, so if you’re a manufacture particularly, uh, infusion the new license like type and whatever they call it. I forget so can we make the meeting of those people specially to start talking about what the strategy might look like. I will just say totally, candidly I think dairy products will be the hardest [00:41:30] to regulate. Um, we have a very strong relationship with the, the dairy events association, government’s association.

I wish I could struck the gender pronoun from those names but they can really map when they take out a person so more, even the lady, the lady cattlemen when I say cattle person. So it’ all good. Nonetheless we are, we have a strong regulation it’s very well grounded. Uh, you know, there is a pathway for it’s, um, I mean if you want …

Speaker: [inaudible 00:41:58] when and where we want to make [00:42:00] a …

Hezekiah: They don’t get, get one of us email, we’ll get you on the loop. It’s gonna be expensive, it’s gonna take time and it’s gonna take longer so I look forward to doing what we can to help you guys out. Um, so one and then two two because you guys are first on the questionnaire. So Michael.

Michael: Uh, first [inaudible 00:42:24]

Hezekiah: I mean speak free. All right what’s your question?

Michael: So my question is, um, and this [00:42:30] might be a hybrid type of question.

Hezekiah: Sure.

Michael: So can you speak a little bit to what happens [inaudible 00:42:37]

Hezekiah: Sure.

Michael: And not prefer the usual, usual …

Hezekiah: Sure.

Michael: You know all these [inaudible 00:42:42]

Hezekiah: So I’m actually gonna cycle or rephrase, what happens to collectives and to cohorts and to ag cohorts in this new framework. So collectives first, the easy one. Collectives are a fragment of our collective imagination. They’re anomaly. They don’t exes- exist in law, they don’t exist in rights. They’re not [00:43:00] a real thing. The only way to define them is in the dictionary and that doesn’t count in a corporate. So collectives will be going away as quickly as possible if all gradual workers were expecting that to be about mid-2019.

That’ll be a year after the agency staff determine that the wall, whatever the wall is, is fully implemented. That is when the, the transition will happen. Cooperatives are very different. Cooperatives are defined in law, So you mentioned that in cohorts. Ag are chapter one division [00:43:30] 20 of the food and act code. Uh, they’re also workers codes. Those are defined in business and professions code. They’re also consumers codes again finally this is a professions code.

Currently cannabis businesses are not allowed to form any of those three block of entities because they do not meet the eligibility criteria for forming such entities. One of our priorities, like one of the very essence we’ve taken this oppose decision on the Trailer Bill is because it doesn’t include provisions for allowing more products. And so we, [00:44:00] we very high priority to see cooperatives allowed into the cannabis space. We’re back and forth with them and have like a soft connecting from the governor’s administration that they will be moving forward with this model.

The question is whether we referenced together codes and say we can form this one, this one and this one or form a new one that is a natural statutory cooperative for cannabis. In which case it could model very much after that figment if our imagination that it’s deflected. Um, was there [00:44:30] you asked really …

Michael: The not for profit.

Hezekiah: The not for profit. To the, to, to the best of our interpretation as far as the not for profit model may actually work itself out. Um, I, I, I’m not ready to say the certainty but it does seem likely that you will be able to form a mutual benefit cooperation or maintain your mutual benefit cooperation. Maintain it as a nonprofit or transition. It seems like you’ll have a lot of flexibility within the mutual benefit corporation structure thus [00:45:00] far.

Speaker: But where is all the subordinates slide especially up and under their [inaudible 00:45:09]

Hezekiah: That will all have to be redone. That was a tricky forth question.

Speaker: That’s my point of review.

Hezekiah: Um, and, and you know, let’s continue talking about implementing 2516 and how we get that license implement entirely. Uh, so you could be clear we’re gonna talk over here and …

Speaker: I have a direct follow up.

Hezekiah: Oh direct follow up? All right.

Speaker: Basically it’s just I do [00:45:30] a lot of these [inaudible 00:45:31] what would be with the subject line kind of recommended at the moments where you can start very quickly. They’re doing these …

Hezekiah: So question was about legal entity and what legal entity to form. I’m not an attorney, I’m not gonna give you any legal advice. Uh, I’m certainly a consultant here taking on this question and I’m gonna answer this actually in a non-cannabis policy. [00:46:00] I’m gonna tell you to look at the different program structures and pick the one that matches your benefits. A I would go any direction you want. I would go more of a it’s not your values. The nonprofit that’s a public benefit.

A mutual benefit you’ve got service and profit you get …There is strictly for profit, there is mixed and there is strictly not profit. Pick the one that matches your business model and your aspirations best. There may be some challenges on bridging through the rest for me 17 but come January 1 2018 you’re gonna have the [00:46:30] flexibility of the open field to do what you want and you know definitely you’re gonna want to talk to your attorneys about what’s new in the meantime.

But don’t, don’t your business is something you’re gonna have for … I mean hopefully It’s not about an exit strategy, hopefully this is a durable business then, you know, you wanna be like … Yes, so the [inaudible 00:46:48] I personally would choose mutual benefit. I take every benefit; mutual, private public benefit like that just seems like the right way of doing business. But if that’s not, pick the one that benefits.

Aaron: [00:47:00] And for the first time we are, we are allowed to make a profit though and so if that’s the direction that you’re willing to go then create corporate entities …

Hezekiah: It’s only the best if [inaudible 00:47:12]

Speaker: Yeah, you go back and forth, maybe I’ll go in Saturday.

Hezekiah: And do what feels like you knocked something and don’t, don’t [inaudible 00:47:19]

Speaker: And what about the, uh, the one that seems most concerning about the manufactures that having to be destroyed if the distributors test [00:47:30] submission fails.

Hezekiah: Uh, manufactures that having to be destroyed if the distributor’s test submission fails. Um, I think that question is that, that rate is going to change dramatically as the laws change. The authority to issuance based, uh, the distribution the testing, inspection, QA, QC all of that is very much in thoughts and I, I that way I knew it’s not gonna stick because the statutory authority to enforce it [00:48:00] won’t exist in two months.

So I don’t know where we’re gonna land on it. I think, you know, the, the preferred outcome is that the producer, the grower or the manufacturer can maintain custody to ensure that there is no contamination while the sample is off getting tested. Um, that is likely where things are spiraling to but that, that wage will not stand.

Speaker: With the Trailer Bill aggressive at all or?

Hezekiah: Um, the, the Trailer Bill, the Trailer Bill allows for open distribution [00:48:30] which would allow for, um, a cultivator or a manufacturer to hold a distribution license to maintain to, to serve that function. It does feel like the legislature has pretty silently rejected that and it’s going to impose an inspector mandate or at some sort of a third party, um, keeping the product in possession in custody of the person or the entity that cases more about it seems to be an accepted consensus for at this point. And so I were [00:49:00] going to get to a point where the product stays with the person that cares about it the most but it’s still inspected by somebody independent. Um, that that’s really the thing that we’re spiraling around.

Speaker: Okay, thanks.

Hezekiah: Yeah, you haven’t asked. You haven’t asked it yet. You’re first.

Speaker: Um, so my question is, is distribution and, and Prop 64, MCRSA, do we know where that’s’ going? Like I’ve heard rampant rumors in the past two weeks said there is only gonna be eight distributors in the state and then I’ve heard if you got 10,000 square feet or less you’re gonna [00:49:30] be able to self-distribute. So do you have any?

Hezekiah: Oh distribution (laughter) [crosstalk 00:49:38] So first, first can we talk about, um, I guess first let me just discover like most financial server. There is nothing that would suggest that there would be a limited number of distributors in the state under I or [inaudible 00:49:55] Um, what is actually in the two trains, right so on these two trains federal effects moving [00:50:00] real quick, same track. There is a car on each one that says distribution on the side of it.

Inside of the MCRSA box Prop related to distribution. Is a requirement for mandatory distribution conducted by a third party independent business. So if you’re a distributor you can’t be an anything else. That independent function is meant to provide, uh, that independent distributor is meant to provide three functions, uh, efficient tax collection, independent [00:50:30] QA, QC and, uh, product inventory to prevent against diversion and/or inversion. In Prop 64 so MCRSA is mandatory independent, Prop 64 is mandatory integrated so the requirement for distribution does not go away.

There is still a step in the supply chain where a licensed distributor must hold a product with an exception which will get to in a moment. A licensed distributor must hold the product, um, but [00:51:00] that was since distributor may be integrated with other businesses. And so it is still mandatory that step is still there, they still do the same functions but it’s integrated with the exception that if you a micro business. [inaudible 00:51:13] is going to be a cultivation and where it’s kind of unclear and/or production area. We’re going to work with 10,000 square feet necessarily refers to.

If you’re small (laughter)

Speaker: Ish.

Hezekiah: Ish you can self-distribute without a distribution license. [00:51:30] However, there is a provision that requires you to serve the functions of a distributor with your license. So in order to obtain a micro business license you will have to demonstrate to the bureau that you are going to provide for tax collection, quality insurance, preventing aversion and diversion. Um, we have proposed and an- another reason why we are currently opposed to the Trailer Bill is this question [00:52:00] of distribute.

Allowing cross size distribution is great for the folks who can afford it. How many small growers can afford affirmative distribution facility and afford a distribution license, in addition to the cultivation license? Doesn’t do a whole lot for those folks and so opening the doorway to that micro business non license requires three lines of distribution. For 10 dollars and below it’s kind of a fundamental fairness piece. That is one of the amendments that we are calling [00:52:30] for. Um, how is it all going to pan out I guess would be the reasonable place to …

Speaker: Yeah.

Hezekiah: To end this rumble. I, I expect and have continued to … I have expected all along that we’ll see a loosening of the distribution requirements in, in MCRSA. I expect that the free market folks deregulate approach in Prop 64 will not stand. You know I think that will run on a bit of a [00:53:00] compromise option. I think independent inspector is a very likely function at the very least a company that self distributes will have to have an independent step.

Speaker: Third party to come in.

Hezekiah: Third party whether that’s a lab, a state employee there is a lot of discussions going on right now about who would actually provide that inspection function. Tax collection does remain a very important piece of this conversation. I mentioned 801410 earlier that’s an attempt to deal with the, the upstream tax. There are concerns about [00:53:30] the downstream tax and so the, the … It is very unlikely that a producer will be excluded from holding a distribution in my sense and how exactly that looks with regards to other requirements, you know, it will, is being negated at.

Aaron: You had mentioned CBAs couple of proposed dimensions in the sense that you know type cottage wanting to get potentially self-distribute.

Hezekiah: Yeah, better go find them ’cause I don’t [00:54:00] remember them (laughter). Um …

Aaron: CBA is tracking these very closely and we have some proposed amendments that really would [crosstalk 00:54:06]

Hezekiah: So, so you know, honestly how many people, is there anybody here the emails, does anybody gets emails sent out 20?

Speaker: Oh yeah.

Hezekiah: So we, we, you know, we put this proposal on the table back, uh,, on I’m gonna say April, April 19th and this is a hey, we need to figure this out a little bit better. And so the first one I mentioned this will be allowing type ones and twos to [00:54:30] distribute without holding a separate license. Type ones and twos are just simply not gonna be able to afford it, right? Secondly we have been very staunch in calling the agricultural cohorts, back to your question.

This has been a very high priority, we’re very concerned about ag cohorts in particular but of course workers and consumer cohorts are a very high priority. With, with regard to ensuring efficiencies can be realized without undermining independent organization. We do want to scale up, we do want to rebuild the marketplace, we already are [00:55:00] but let’s do it a little bit more efficiently Well, let’s not take a bunch of independently young businesses away from people that build them so that cooperative model is important.

We’ve also suggested that for a business that operates, you know, if you’re a producer, a grower, cottage, a grower distributor, fine, manufacture distributor fine, retail distributor, fine, but if you wanna do all three of those that there should be some limitations. Mike Gregers, they can sell their product on site; they can hold up to I believe six [00:55:30] additional retail locations. Wineries they can sell their products on site, they think of one additional retail.

And so putting some limitations on the businesses that choose to operate in all of the segments will not ensure that independently produced products in fine shelf stays as well. So that is another one of our amendments. Um, and then the bottom line for those who got the email today you saw it but the Trailer Bill is suggesting to repeal language that is intended to prevent monopolies [00:56:00] or unfair restraints in trade. That doesn’t make any sense. Those provisions are passed by the voters that is a popular mandate and it’s just what we all want for our …

Audience: (clapping and cheering)

Speaker: Yeah, preach.

Hezekiah: And so restoring those provisions, I, I am, I am happy to say, you know, I mentioned at the beginning of a big standard for the long Sacramento we, we, we did, we did get relatively hard commitments from leadership in both houses today [00:56:30] that that fundamental language protecting against monopolies would be included in any compromised Trailer Bill so we will have that going forward.

How exactly that’s implemented, whether that’s caps on size and volume, whether that’s caps on which licenses you’ve … How exactly those policies are implemented the truth is those policies were in Prop 64. The state has a responsibility to implement those provisions to prevent monopolies and abuse [00:57:00] and we need to do the hard work to implement them. And so that’s our, that’s our bottom line and that is what I will be going to send it out to committee tomorrow and communicating and, uh, there is a petition online Nava associating take action/something else lock it. We’re about to have their support [crosstalk 00:57:19]

Speaker: Did we get a status on AB 64 and non-retail store fronts and …

Hezekiah: Yes, AB 64 are non-store front dispensaries. Um, [00:57:30] so non-store front dispensary is obviously an issue on critical importance. To our membership, you know, it’s, it’s the lowest failure entry, it’s the easiest start of business. This is the knowledge cultivator equivalent in retail. Right, this is, this is very much a sort of doing yourself, let’s get it done. No-store front is not included in the original MCRSA, it’s not included in Prop 64. Um, the, currently all three of these tracks have an option.

[00:58:00] The regulations did include a fair amount of definition about what delivery is, what it means and how it works. It did not mandate that a retailer, it said a licensed retailer is the only one that can do delivery but it did not mandate that a retailer have a store front, so one of our comments here is clarification. Hey, we notice that you didn’t require this; does this mean we don’t have to? We think there is an outside chance that that [00:58:30] might be the case. Maybe they’re not requiring dispensaries to be store fronts.

I have a close letter which over here also mentions the importance of, of including language that would allow for non-store front dispensaries in the Trailer Bill. We think this is very critical given the timing issue that I discussed earlier. In order for the rule makers to get this done in time, they’ll need the law to say that. So we would actually like the Trailer Bill to include language that authorizes [00:59:00] and in fact requires the regulators to make that available. And as I take a fall back we have AB 64 which was introduced by Bonta would clearly jump Sawyer and Lucky, the assembly author of the original MCRSA package.

This bill covers quite a number of topics, certainly the highest priority, uh, topic in this bill from our perspective is the shift from store front dispensary to including a non-storefront dispensary option. AB 64 is moving. [00:59:30] It’s enjoyed very strong support in the committees that it’s appeared in so far. For, our practical focus is it does seem like it’s on a good track to becoming law. Its analog last year 805075 was pretty good until it broke up at the end. It’s a very heavy bill, like a lot on it.

Sometimes these bills fall apart at the end of session. Um, we would like to see it’s really cleared up and arrives ASAP included in the Trailer Bill and at the end of the day we would prefer AB 64 be stripped down [01:00:00] to include only those provisions. The good news is there is no opposition left, the police chiefs have written their opposition, in fact they’re supporting the current language, local government of these cities et cetera. Everybody is on board it’s just a matter of making sure this gets through the process and ultimately gets through the process as quickly as possible.

Aaron: All right, guys. I’m sorry I know there are some questions.

Speaker: It’s a good segue

Aaron: Enforcement.

Speaker: What does it look like if they’re on board with it?

Speaker: What would the force would look like for those who don’t comply with regulations [01:00:30] at the same level?

Aaron: All right.

Hezekiah: So for folks, for folks who do not comply with the state rate, um, the enforcement will look a lot like it’s ours. Um, Prop 64 they change a number of the criminal penalties and so the, the trial side will look a little bit different at least for first offenders but by the time you get into your second and third it’s gonna look a lot like it’s always looked for folks that are not compliant.

Aaron: So guys we mentioned that there are there are emails that go out, there is a lot of information for members. [01:01:00] So again one last time I wanna say, if you’re not a member please sign up. You know we can only disseminate so much information at these meetings, there is a lot of great content on our website and in emails and how about a round of applause for Hezekiah. He was unbelievably (clapping and cheering). We’ll see you next time, probably [01:01:30] the same day.

Speaker: It’s nice to meet you. See you around.

Speaker: Yeah, absolutely. Take care [crosstalk 01:01:38]