James Daisa

Oakland Proposal Would Give City a 25 Percent Ownership Stake in New Cannabis Companies

A City Council proposal in Oakland, California would force every new cannabis business applicant to turn over 25 percent of their ownership to the city and give officials at least one seat on their board of directors in exchange for a license, according to a KGO-7 report.

The move comes less than two months before California voters decide whether to approve a recreational-use ballot initiative in November.

“All I want to do is treat it as a business, maintain control, but at the same time generate as much revenue as I can to help the people of East Oakland,” Councilman Noel Gallo, who co-authored the amendment changes, said in the report.

According to Gallo, the revenues, in the millions, would be used for job training and other programs targeted at underserved communities. However, according to a San Francisco Chronicle report, the three job-training programs that would receive the funds are run by politically connected people, including Hispanic Engineers, Builders & Contractors of California, which is led by Rafael Zamora, a childhood friend of Gallo’s.  

Robert Selna, an attorney representing some would-be permit holders, said the “highly unusual” plan “has so many legal problems, it’s hard to know where to start.”

“It would put our clients in a very difficult circumstance,” he said. “They would not have chosen the city of Oakland to be part of their company. They wouldn’t give their profits to them.”

State Assemblyman Rob Bonta, the lead author of the state’s marijuana regulations, said the proposal would not be legal and would likely represent a conflict of interest for the city.

“The idea of a transfer of 25 percent ownership and one seat on the board raises significant concerns about prohibited taking and about whether this is an appropriate use of eminent domain,” Bonta said. “If the city is an owner, it’s also a regulator. So it’s regulating itself.”

The council’s Public Safety Committee will review the proposal on Oct. 4.

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