Pro

Beach city political brawls capture Calif. industry frustrations

By Alex Halperin
Oct 2, 2022
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A mailer supporting Measure E in Redondo Beach

Bitterly contested ballot initiatives on whether to allow dispensaries in three SoCal beach cities could have far reaching implications for retailers trying to access consumers, an ongoing concern for California’s beleaguered cannabiz. The measures have attracted fierce criticism from local officials as well as some in the industry who say more similar initiatives could further hinder the state market.

The initiatives are funded by Catalyst Cannabis and Tradecraft Farms, two retailers eager to open in the affluent and heavily touristed markets of Manhattan Beach, Redondo Beach and Hermosa Beach (Los Angeles Co., 3x). In response, town officials have condemned the initiatives as a foreign invasion. Manhattan Beach Mayor Steve Napolitano and all three city council members signed a statement calling the vote “an abuse of the initiative process,” backed by out of town business interests.

Elliot Lewis, CEO of 13-shop chain Catalyst calls it grassroots democracy. Lewis has gained some renown for social media jeremiads where he describes himself as a fighter delivering #weedforthepeople in the face of “Chads” and MSOs “that ain’t ready for real competition.”

Lewis’ opponents accuse him of trying to secure for himself the kinds of anti-competitive carve outs he claims to oppose, and that few SoCal retailers enjoy.

If passed, the initiatives don’t guarantee licenses for Catalyst and Tradecraft, but they would have significant advantages. Notably for these tightly zoned communities, Walker says he has secured viable dispensary properties in Redondo and Hermosa and Lewis says he has one in Manhattan and is closing on another in Redondo.

Jonatan Cvetko, executive director of the United Cannabis Business Association, and a vocal opponent of the beach ballot initiatives, said, “I am absolutely convinced what Elliot is attempting to do will snowball into more local jurisdictions banning and enforcing against delivery companies. It will be a contraction of an already too small legal market.”

Affluent residents and tourist traffic

It’s not hard to see why Lewis and Walker wants into the beach cities, which boast affluent residents and tourist traffic. Residents mostly support legalization. But NIMBYism is the rule in these “family-oriented” communities, and access to weed isn’t a pressing issue for local tokers. Though all three cities ban REC delivery, several major delivery services still serve the towns. (The same situation holds in many other California jurisdictions.)

  • Each beach city has its own saga, but six years after legalization none has gotten around to opening pot shops.

Impatient with local inaction, Lewis and Walker have poured hundreds of thousands of dollars into hardnosed campaigns to pry these markets open.

  • Redondo Beach decides on October 19. The other two vote on Election Day.

Beyond capping the number of dispensaries, the initiatives contain additional provisions that benefit the eventual licensees:

  • Most controversially, they would ban delivery by companies based outside those cities, pushing both storefront and delivery traffic to the local shops.
  • Additionally, the initiatives in Manhattan Beach and Redondo Beach don’t create a business tax, depriving the cities of of cannabis revenue, and perhaps attracting out of town buyers. (Catalyst is already known for its low prices.) Hermosa Beach residents are also set vote on a separate cannabis business tax measure.
  • Lewis said he would support the cities adding a “reasonable” tax. “Bullshit,” Cvetko responded. “If they cared about the tax they should have included it from the beginning.”
  • Cvetko, also calls the initiative “racist” since it would block the hundreds of equity delivery services coming online in the city of Los Angeles from serving these markets.
  • Lewis calls Cvetko a “doosh bag” [sic] who wants to protect his business interests. Cvetko owns, but does not manage, a delivery license in the town of Montebello.
  • Cvetko and Lewis are set to debate tomorrow. (October 3)

A third provision in all three cities advantages license applicants that have had a collective bargaining agreement in place with a labor union since May 2021. Lewis describes the measure as pro-worker, but he didn’t develop it in partnership with a labor union.

  • His Redondo Beach measure landed an endorsement from the L.A. County Democratic party.
  • Redondo Mayor Bill Brand told Easy Reader News. “The L.A. County Democratic Party failed to ask any of the six Redondo Beach elected officials who are Democrats what their positions were on this measure,”

“We are the least greedy”

In an email to WeedWeek, and elsewhere, Lewis acknowledges that the initiatives include advantages for the eventual license winners. “There has to be some profit motive to pay for what it takes to expand access and open cities,” he said. However, he argues the community benefits as well. “WEEDFORTHEPEOPLE means uplifting communities, good paying jobs, expanding access, fighting to change policy that is bad for the industry.”

  • “I would say we are the least greedy of any corporation out there,” he wrote. “BIG TECH is gunning for statewide control, shit paying jobs, no money reinvested, high corporate salaries, and a fucking Chad takeover.”

In the final weeks of the campaign, Catalyst is funding a get out the vote effort.

California’s larger delivery companies, which are facing crises in every direction, have been relatively muted in response. 

“You can’t claim that you’re #weedforthepeople when you’re being blatantly self-serving…[and] monopolistic,” Chris Vaughn, CEO of delivery service Emjay said. “It’s weed for Catalyst and if it’s anyone else we’ll try to eff it up as much as possible.”

  • Lewis says he offered Vaughn “the opportunity to use our stores as a hub…if they pitched in some money. They refused.”

“We are just getting warmed up.”

The bigger question is what similar measures could mean for more cities. Lewis plans to use similar initiatives to open more California cities. “We are just getting warmed up,” he wrote in the email. ”2023 gonna blow minds.”

Until this point, local delivery bans have been very difficult to enforce. However a coming January 1 integration with delivery data into METRC, the state’s tracking software, will make it possible to audit who made what delivery. Surely cities will be tempted to reduce the pot taxes escaping their borders.

The issue of local control also has renewed urgency since the September passage of SB 1186 which prohibits cities from banning MED delivery.

  • Since REC legalization, California’s MED program has withered. The state issues only hundreds of MED cards a month. (Clarification 10/8/22: However, 1186 also allows delivery to those with a doctor’s recommendation, a potentially larger constituency.) 
  • However, it could invite a new lawsuit from cities which previously sued the state, more or less successfully, to keep out delivery drivers from other areas.

Industry opponents of the bill warns that if Lewis is successful, or others adopt similar tactics it could lead to a market with less access, less consumer choice and a weaker industry. “Any scenario where you are limiting a customers ability to order is a step backwards for the legal market,” Vaughn, of Emjay, said.

“There is nothing more American and freedom loving…[than the] democratic process,” Lewis recently posted on LinkedIn.

How the campaigns work

By collecting signatures of 10% of a California city’s registered voters, citizen-led initiatives can force city councils to adopt a measure as written or place them on the local ballot. Lewis first used this strategy to open up the city of El Monte, in east Los Angeles Co. After the city council approved the plan, he opened the city’s first dispensary in November 2021.

By then Lewis was already pursuing similar plans in the beach cities, and quickly attracted criticism. “Your signature gatherers came to my door…and they outright lied,” by representing themselves as from the community rather than a private interest group, Redondo Beach Councilman Redondo Christian Horvath told Catalyst co-founder and lawyer Damian Martin.”

“I’d like to congratulate you because this council doesn’t agree on anything,” except opposition to the initiative, Councilmember Laura Emdee said in the same video, edited by initiative opponents. “This is amazing.

All three initiatives still gathered the necessary number of signatures. Despite discussions, none of the three has a competing initiative on their upcoming ballots.

The get out the vote effort has continued to attract criticism for misleading voters. This Redondo Beach mailer paid for by Lewis’ company, South Cord Management LLC, for example, only references the plant to say that the initiative would protect “local control over where cannabis shops can be located in the city.”

beach cities
A mailer supporting Measure E in Redondo Beach
beach cities
A mailer supporting Measure E in Redondo Beach

Local elections are notoriously difficult to poll, so it’s hard to predict whether the measures will pass.

Adam Spiker, a cannabis industry lobbyist with Spiker Rendon Consulting, who initially worked on the initiatives but is no longer affiliated with with them, said he was “at peace” with them passing. “Getting something is better than nothing,” he said. “Point to me a perfect ordinance for cannabis regulation, it does not exist”

“These weren’t intended to be knock down drag out knife fights,” he said. “We’re fighting over scraps…The real fights shouldn’t be at each other they should be at the state that’s done a terrible job administering the law.”

Correction: This story initially misspelled Damian Martin.