Cannabis cultivation in CT could be linked to big money investors

Before budding entrepreneurs can begin selling cannabis across Connecticut, hundreds of square feet of plant must thrive in grow facilities. The first news about these entrepreneurs have generated contradictory reactions.

Despite a rigorous system that screened the first companies vying to grow cannabis in the state, some members of the state’s cannabis community have raised concerns about those companies’ ties to business and politics. However, others argue that these concerns ignore the realities of the cannabis industry, which is poised to experience significant growth.

“People with capital are interested in this industry — it’s a billion-dollar industry that’s about to become federally legal,” said DeVaughn Ward, senior legislative counsel for the Marihuana Policy Project, a nonprofit profit based in Washington DC.

This month, the state Department of Consumer Protection he announced the names from 16 applicants pre-approved by the state cannabis equity board for the so-called social equity cultivation licenses. These applicants could be among the state’s first cannabis growers if they win DCP’s final approval.

The state established strict criteria for these so-called social equity cultivators, which employers in Connecticut’s “disproportionately affected areas” must possess. State law requires that these areas have “a historical drug conviction rate of more than one-tenth, or an unemployment rate of more than ten percent.”

According to DCP, the social equity process is only a conduit to the licensing of cannabis. Potential growers had a one-time application period of three months to apply for these special licenses.

The law also imposes an annual income limit on welfare applicants. They cannot earn more than three times the Connecticut median household income. In addition, the social equity applicant must own at least 65 percent of the cultivation business.

A handful of high-profile names are attached to some of the social equity growers — some as applicants, some as investors. Hartford City Councilwoman Tiana Hercules is the social equity applicant in one of the companies through a partnership with cannabis company Ayr Wellness. Former state Sen. Art Linares, the husband of Stamford Mayor Caroline Simmons, is a financial backer of another of the companies.

“The fact that these licenses are connected to people who have means, it shouldn’t be surprising,” Ward said. “These are huge, capital-intensive efforts.”

Navigating the application process

The state maintains that these high-profile names changed nothing about the process. The Social Equity Council, the organization that oversees Connecticut’s cannabis equity initiatives, told Hearst Connecticut Media that it had a thorough, and sometimes blind, process to review these applicants.

“The council took their responsibility very, very seriously,” said council chief executive Ginne-Rae Clay. “People think a lot of this was done in the back offices.”

DCP says 41 companies applied for social equity cannabis cultivation licenses. The consulting company CohnReznick reviewed the documents of all those applicants, and when they were presented to the Social Equity Council, it was without any identifying information.

CohnReznick’s consultants are from out of state and “don’t know any of the applicants,” Clay said.

The Social Equity Council was also very concerned about ensuring “genuine ownership” among social equity applicants, DCP Deputy Commissioner Andréa Comer explained. Comer also chairs the Social Equity Council.

“True ownership means the equity applicant will control board votes and management decisions,” he said. The council prioritized ensuring that people from disproportionately affected areas were the long-term owners of these businesses.

But those safeguards haven’t stopped some cannabis advocates from raising an eyebrow at the social equity growers’ announcement.

“I think … certain people are more prepared to be able to fill out the extensive application work,” said New England Craft Cannabis Alliance Director Joseph Raymond Accettullo. Accettullo is an advocate for existing cannabis growers, who he believes were left out of the social equity application process by high licensing costs. The social equity license fee in Connecticut costs $3 million, something industry experts have analyzed throughout 2022.

Accettullo is among them, and his criticism of the social equity application process is not new. Even given the strict limits on who can qualify as a welfare applicant, he believes the state needs to lower licensing fees to better target people affected by the war on drugs.

Looking at the long term

Just because there are high-profile names doesn’t mean the system isn’t achieving its goals, said Ward, who is based in Connecticut.

“I do know black men and women who were granted these licenses and they are exactly who the Legislature was trying to get one of these opportunities,” he said. In addition, current public information also does not fully capture who social equity applicants are, according to Ward.

For example, a social equity grower could have multiple social equity applicants within the overall structure. Although documents from the Secretary of State broadly show who is involved in a company, more granular data will be available once all applicants receive final approval, according to DCP.

But beyond these early announcements and the conversation surrounding them, Ward said the success of Connecticut’s social equity pipelines can’t be judged based on rough sketches of what the business will look like before it begins to grow cannabis and succeed (or fail) in the industry.

“(The state) still has other licenses to roll out, you know?” Ward said. “This is really premature.”

veronica.delvalle@hearstmediact.com

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