Committee approves fee revisions study, asks reports and pauses 2025 cannabis retail lottery

The Government Operations Committee voted on June 3 to amend Los Angeles Municipal Code fee and fine provisions for commercial cannabis regulation and to direct multiple follow-ups, including a report on the feasibility of exempting social equity applicants from proposed fee increases. The committee also instructed the Department of Cannabis Regulation to pause any Phase 3 retail license lottery scheduled for 2025.

The committee’s action follows public comments from licensed and prospective cannabis operators who urged a pause in license lotteries and criticized the city’s fee and enforcement practices. Council member Padilla moved the fee ordinance amendment as amended; Council member Lee recorded the first vote on the motion to pause the lottery and Padilla seconded. The committee approved the package by roll call.

Why it matters: DCR’s fee study is intended to align license and enforcement fees with the department’s full-cost recovery mandate, but many social equity applicants and licensed operators told the committee that the current tax and fee structure and ongoing unlicensed market activity are undermining licensed businesses. The committee’s instructions seek both immediate relief (pausing a license lottery) and a series of reports to clarify costs, timelines and potential subsidies for social equity participants.

Several social equity and licensed-operator speakers told the committee the city should halt expansion until core problems are addressed. “I urge the city council to pause the lottery for 2025 of any new cannabis licenses until critical issues with the current social equity program are addressed,” said Alexis Luna Reyes, identifying herself as owner and operator of JC Rad, a social equity cannabis business in District 14. Damian Martin, co-founder and attorney for Catalyst Cannabis Co., told the committee that licensed businesses are failing and that adding new licenses would worsen the situation. “The idea that we’d be adding a hundred new businesses is honestly just crazy,” Martin said. Elliot Lewis, CEO of Catalyst Cannabis Co., urged “radical change” and said policy choices should strengthen the regulated market relative to the black market.

Department presentation and city finance context: Michelle Gurokian, executive director of the Department of Cannabis Regulation, reviewed the department’s five different processing timelines that have evolved since 2018 and explained why fees were being recalibrated. She said the department operates on a full-cost recovery model and does not receive general fund subsidies; she told the committee that staff and indirect costs have grown since the prior fee study. Gurokian said DCR’s licensing counts peaked near 1,400 and have fallen to roughly 1,000 as some license holders did not transition to state annual licensure and some non-retail activities generated no revenue.

Gurokian described process changes the department has adopted — a pre-application review, a legal business entity record, and revised public-notice steps — intended to reduce time and cost for businesses that are ready to operate. She also noted interdependencies with other city departments: building inspections, fire, and planning sign-offs remain required for businesses to operate and can cause delays even after DCR has completed its licensing steps.

CAO and funding options: Yolanda Chavez of the City Administrative Office (CAO) advised that waiving or subsidizing fees is a policy choice but any subsidy generally must be covered by the general fund because fees are for services. Jason Kline of DCR said DCR has a California Equity Grant (CEG) appropriation of about $3.5 million for calendar year 2025 that could be used to offset some fee increases for social equity applicants in the short term, and suggested the committee consider the grant as one offset option while the CAO models longer-term budget effects.

Committee instructions and report requests: The committee approved a package of instructions that (summarized) requires: 1) the CAO, DCR and City Attorney to report back before July 1 on the feasibility and fiscal impact of exempting social equity applicants from the proposed fee increases and on options to fund any subsidy; 2) DCR to provide a detailed process map of how applications and fees are handled from intake through completion, including estimated processing times and an account of tools and interdepartmental handoffs; 3) DCR to report back on fine usage (number of fines issued, repeat violations and how fine revenues have been used) for the past five years; 4) the CAO to contract an independent third-party study on fee impacts and the relationship between fees and the cannabis excise tax; and 5) the City Attorney to prepare ordinance language to amend relevant Municipal Code sections (including LAMC §104.19 and §104.03 processing-time provisions) consistent with the committee’s guidance. The committee also asked DCR to align continuation of certain program elements with the state timeline through 2031.

Lottery pause: Separately, the committee amended the Padilla–Price motion to explicitly instruct the Department of Cannabis Regulation to pause any Phase 3, Round 3 retail license lottery planned for 2025. Assistant Executive Director Jason Kline and Executive Director Gurokian confirmed the municipal code contains no fixed lottery date and the committee can instruct staff to delay lottery activities; the committee approved the instruction as amended.

Numbers and budget estimates discussed at the hearing: DCR staff said licensing counts had fallen from about 1,400 to roughly 1,000. The CAO noted that 34% of existing licenses are held by social equity applicants. The CAO presented a rough estimate that denying the fee increases entirely would reduce DCR and related departments’ revenue by about $3.7 million; an exemption limited to fee increases for social equity applicants was estimated at roughly $2.4 million. Committee members suggested offsets, including eliminating vacant positions and reducing certain accounts; the CAO said the general fund would be required to cover any permanent subsidy and offered to report back on costs and offsets before July 1.

What the committee did not decide: The committee did not adopt a permanent fee waiver and did not finalize ordinance text; it asked for report-backs and a third-party study to inform any final ordinance. The committee also did not set a final tax rate change or any new tax policy; discussions about excise tax reductions and their feasibility were directed to future fiscal analyses.

Next steps: DCR, CAO and the City Attorney were asked to return with the requested analyses before July 1 so the Council and committee can consider ordinance language and fiscal offsets ahead of the July 1 fiscal timeline. The committee’s actions pause license expansion in the short term pending those follow-ups.

Ending note: Public commenters representing social equity and licensed cannabis businesses repeatedly urged the committee to prioritize enforcement against unlicensed operations and to lower tax and fee burdens on legal operators. Committee members requested clearer processing timelines, interdepartmental coordination and fiscal estimates to guide any policy adjustments.