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In June 2022, New York Gov. Kathy Hochul announced a deal had finally been reached to fund a $200 million public-private effort, which would finance cannabis dispensaries run by the people who have been the most impacted by the war on drugs.
The much-anticipated public-private fund is now coming under scrutiny following an investigation by THE CITY’s Rosalind Adams, which uncovered a "lopsided deal" favoring the private equity firm Chicago Atlantic Group and raising concerns about the state's social equity goals.
The agreement heavily favors Chicago Atlantic, leaving the state exposed to significant risks, noted the outlet.
Even the New York Office of Cannabis Management (OCM) cast doubts on the fund’s viability according to internal OCM documents that questioned whether the deal had overstated the potential revenue and profit potential.
New York state, unable to secure a private equity partner, agreed to a $50 million loan from Chicago Atlantic at a 15% interest rate, with all risk borne by the state.
Critics, including Reinvent Albany, an organization that advocates for government transparency and accountability, deemed the deal to have been detrimental to the state and prospective dispensary owners. Legal experts and consultants likened it to distressed debt lending.
Despite the skepticism and advice against the arrangement, negotiations ultimately led to a secret agreement benefiting Chicago Atlantic.
Previously, THE CITY revealed how cannabis licensees who accept loans from the social equity fund are burdened with high construction costs that they don't control and with interest rates that exceed the state's initial estimates.
"Everyone is worried about defaulting because of the rules and regulations of this loan," said Roland Conner, who runs Smacked on Bleecker Street in Greenwich Village, the first legal dispensary owned by a person affected by the drug war.
Details of the deal are still secret, with New York state authorities denying Freedom of Information Law requests. The state comptroller’s office and key lawmakers say they were not informed or involved in the making of the deal, exposing a shocking lack of oversight.
Meanwhile, Chicago Atlantic secured favorable terms, including leasing rights and a $100 million commitment for property development, raising yet more concerns about profiteering at the expense of marginalized communities.
The handling of New York’s cannabis program seems to reflect a corrosive mix of both ineptitude and potential corruption. While officials may have sought to support marginalized groups, their actions suggest a lack of due diligence and transparency.
One element of the story, which you can read in full here, is that social equity applicants are furious.
A Queens shop owner, Dalessio, who was awarded a retail license designated for people impacted by past drug convictions told THE CITY that after a year of back and forth with the fund, he walked away from the deal.
"It just left such a bad taste in my mouth. I warned everyone I could to stay away from this deal," he said.
Photo: Courtesy of Branding Pot via Shutterstock
