CONSUMERS

Applying for a 'social equity' license to run a pot shop? You need to have lived in these areas

Ryan Randazzo
Arizona Republic

The Arizona Department of Health Services filled in the final blank, announcing Friday the geographic requirements for people who plan to apply for "social equity" licenses to run marijuana shops.

The Smart and Safe Arizona Act voters passed last year not only legalized possession and sales of marijuana to people 21 or older but also calls for 26 new shop licenses to go to people "from communities disproportionately impacted by the enforcement of previous marijuana laws."

Defining exactly which communities fit that description was not detailed in the ballot measure but was left to the ADHS officials to define. They have now done so.

Essentially, ADHS has defined those communities as 87 of the state's approximately 500 ZIP codes. ADHS posted a list of those ZIP codes online Friday without publishing an explanation as to how the agency determined those areas were the most impacted by previous marijuana laws.

The rules say a person must have had a physical address in one of the ZIP codes and lived at it for at least three of the past five years. While the state has about 500 codes, many are for post office boxes only.

"The methodology to identify communities disproportionately impacted by the enforcement of previous Arizona marijuana laws included a thorough review and analysis of a variety of data sources, including research and analyses of criminal justice and socioeconomic data," ADHS spokesman Tom Herrmann said Friday.

"The identified ZIP codes include communities disproportionately impacted by incarcerations for marijuana crimes in combination with social service program indicators."

The ZIP codes released by ADHS appear heavily focused on or near Native American reservations.

Social equity programs have been controversial in other states, and many experts expect people who think they should be eligible but are not in Arizona to challenge the rules in court.

“I’m sure they’re going to get sued,” said Will Humble, a former ADHS director who implemented the state's medical marijuana program, and who now serves as executive director of the Arizona Public Health Association. “It’s possible the lawyers said the more information we provide, the more ammo we are offering."

Humble said it is difficult to judge the list ADHS developed without knowing the criteria the department used to come up with the list.

"One of the principles of good governance is to explain the conclusions that you've come to," Humble said.

Even without that information, the list is compelling, he said.

"This is the first time I’m aware of the state of Arizona has basically admitted there are some communities that have been unfairly targeted by law enforcement and prosecutors," he said. "They had to be forced by voters to admit it."

The 26 licenses:Arizona will give out marijuana licenses to address past inequities, but some worry about fairness

Guidelines for social equity applicants

The social equity licenses are a part of Proposition 207, which voters approved last year, legalizing recreational use and sales of marijuana.

ADHS had released rules for who is eligible to apply for the social equity licenses but until now had not defined the geographic criteria.

People with violent felonies and certain other crimes on their record are excluded from applying.

The act voters passed allows for the expungement of criminal histories if they involve crimes that are now legal because of the act, such as possessing small amounts of marijuana.

Specifically, ADHS has said social equity applicants must meet three of the following four conditions:

  • Have had a household income less than four times the federal poverty level for three of the past five years. For 2021, the federal poverty guidelines for a family of four are $26,500, so the family could earn no more than $106,000 for an individual from the family to qualify.
  • Have a previous marijuana conviction for which they've been granted expungement, as allowed through Proposition 207, or a state or federal marijuana conviction. Either a copy of the expungement or conviction document will be required.
  • Have a spouse, parent, child, sibling or guardian who was convicted of a marijuana crime.
  • Have lived for at least three of the past five years in a “community that has been disproportionately affected by the enforcement of Arizona’s previous marijuana laws," which are the ZIP codes released Friday.

The department initially planned to issue the geographic criteria by Sept. 1, as many people are waiting on the information to determine whether they can apply.

Licenses expected to be lucrative

Arizona has a limited number of licenses for marijuana shops, making them highly valuable. Including the social equity shops, the state will have just 169 licensed locations that can sell marijuana. There is no limit on the number of testing labs, which also can be licensed through the social equity program.

A Mint Cannabis billboard that says "WEED IS NOW LEGAL!" is seen near Roosevelt Street in Phoenix on July 9, 2021. Recreational marijuana was recently legalized for adults 21 and older in Arizona.

ADHS is planning a random selection to determine who gets the 26 social equity licenses after an application period in December. The selection likely will take place in early 2022, according to the ADHS.

It is possible that thousands of people will apply for the licenses because they pose such a lucrative opportunity. Officials working to help people expunge their records have reported that dispensaries, some that operate in multiple states, are fishing around for potential applicants at expungement events.

Earlier this year, the state issued 13 marijuana shop licenses in rural areas and saw 377 applicants pay $25,000 nonrefundable fees for a chance to win. Twenty-two of those were determined ineligible. With the lower cash threshold for social equity licenses, more applications are expected for them.

Applicants in Arizona can partner with existing dispensaries to help finance and operate the shops if they choose.

In addition to paying $5,000 and meeting the criteria, applicants also will need to complete training from the state to help prepare them to run a business in the highly regulated industry.

Registration information for the training is available at azdhs.gov/SocialEquity.

Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.

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