“Undue Concentration” for L.A. Marijuana Cultivation

When the City of Los Angeles passed its ordinances allowing commercial cannabis businesses, the City placed limits on the total amount of licenses available in each community for each license category, based on “undue concentration.” The City made it easy to understand the “soft caps” for most of the licensing categories. For each neighborhood’s retailers (Type 10), microbusinesses (Type 12), and manufactures (Type 7) –the ratio is one license per 10,000, 7,500, and 7,500 residents, respectively. The City has even provided the exact number of licenses available on its Commercial Cannabis License Capacity Chart (“License Capacity Chart”), here.

However, the cultivation license limits are more difficult to understand. Here is how the city defines cultivation limits for Undue Concentration:

a ratio of 1 square foot of cultivated area for every 350 square feet of land zoned M1, M2, M3, MR1, and MR2 with a maximum aggregate of 100,000 square feet of cultivated area and a maximum aggregate number of 15 Licenses at a ratio of one License for every 2,500 square feet of allowable cultivated area for Cultivation (Types 1A, 1C, 2A, 3A, 4 and 5A).

After careful examination of this definition, here’s what we think the City means to do with undue concentration and available plant canopy:

On the License Capacity Chart, if you take the Total Square Feet of a given neighborhood and divide that number by 350 square feet, the result is the listed as “Cultivation + Microbusiness (with cultivation)”. For example, Harbor Gateway has 43,982,470 total square feet, which means that Harbor Gateway has about 125,664 total square feet of eligible canopy (43,982,470/350=125,664).

There can also only be 1 license for every 2,500 square feet of allowable cultivated area. Sticking with the Harbor Gateway example, 125,664 eligible square feet divided by 2,500 equals 50 potential licenses, max. However, that number assumes that all licensees will have grows no larger than 2,500 square feet, which probably isn’t the case. To that end, the City informs us that cultivation licenses will be processed on a first come, first serve basis.

The rules also stipulate a maximum of 100,000 square feet and a maximum of 15 licenses, but it is unclear whether these maximums apply to the neighborhood as a whole or to the individual licensee (who could stack up small cultivation licenses to secure 100,000 feet of canopy in aggregate). However, the initial total calculation of the eligible canopy area would be irrelevant for multiple communities if there was a maximum of 100,000 square feet total for that community. Therefore, we can assume that the 100,000 square feet should be applied per individual license, with no one person or entity holding more than 15 cultivation licenses within a given community.

All of that said, the key question remains: How many square feet can I apply for in my application? The ultimate answer is that “it depends.” No matter how much available canopy space there is in a community, the situation depends on factors like how many people apply for cultivation space, how much space each person applies for, how much space the City will grant, etc. We do know that as the City of Los Angeles grants licenses, the Undue Concentration license soft caps will become clearer.

For now, here’s a chart (with approximate numbers) to summarize how many licenses per community we will most likely see:

*Actual maximum amount of licenses available if the City does not cap at 15 licenses.

**Average canopy space assumes that City will allow the maximum amount of licenses, and that each applicant will apply for an equal amount of canopy space.

© 2018 Canna Law Group, a practice of Harris Bricken.