New York Gov. Kathy Hochul announced a sweeping overhaul of the state’s cannabis regulatory agency Friday, following the release of a critical report that highlighted leadership failures, lack of transparency, and poor communication in the state’s legal cannabis market rollout.

The governor also unveiled a $5 million grant program for certain license holders and a new task force to combat illegal weed shops.

The governor confirmed on Friday that she had directed the executive director of the Office of Cannabis Management, Chris Alexander, to resign immediately. The move came the same day the Office of General Services issued a report detailing the agency’s shortcomings and missed opportunities, a copy of which was obtained by Green Market Report.

“We’re taking much needed steps, long overdue, to make the cannabis program in New York successful and work as promised,” Hochul said at a press conference. “It promised to deliver prosperity and opportunity that we know it can and do so equitably, efficiently, and effectively.”

Hochul was joined by OGS Commissioner Jeanette Moy, who oversaw the review of the OCM.

Key findings

The OGS report, which was based on a month-long assessment, found that the OCM left applicants in limbo for months, neglected struggling farmers, and allowed illegal dispensaries to thrive while the legal market faltered.

Key findings included OCM’s $26 million underspending of its FY 2023-24 budget, leaving resources “untapped,” despite repeated claims from the office of needing more funding. The agency also spent significant time exploring a new mapping application instead of using the existing State Liquor Authority Mapping Project, delaying applicants’ ability to check their proposed locations’ proximity to schools, houses of worship, or other retail outlets.

Other findings included:

• The agency failed to provide adequate information to applicants and the public on how applications would be processed and how many would be reviewed.
• OCM failed to request the posting of 13 vacant positions related to licensing, leaving the organization shorthanded.
• At least six distinct licensing systems had been developed for use by the OCM since the first quarter of 2022.

The OGS report also highlighted a lack of proper reporting and oversight, with the task force and the Division of the Budget not receiving required internal controls documents from the OCM. Additionally, the report raised concerns about potential conflicts of interest, as individuals and units crafting policy at  the OCM are also involved in processing individual applications, Hochul’s office said.

Clearing the backlog

As of April 10, the OCM determined that 309 applications should be denied, including 248 from the 2022 CAURD program. However it had not notified the applicants or the Cannabis Control Board. Of the 248 applicants, 115 had their applications placed on hold due to background check issues, which is not disclosed to the applicant until the issue is resolved.

The report also found no documented process for denying applications, deeming an application abandoned, or appealing denials.

Hochul directed her team to collaborate with the OCM to promptly implement the report’s recommendations, including clearing the licensing backlog within 90 days and enhancing communication with applicants.

At the press conference Friday, the governor cited “growers who’ve waited too long for a market for their harvest” and “New Yorkers who are sick and tired of the unlicensed retailers who’ve taken over their neighborhoods.”

“I’m grateful to Commissioner Moy and her dedicated team who will continue to be a trusted advisor to me as we implement the report’s recommendations and to my team in the executive chamber,” Hochul said. “They will take a larger role in this process in the interim.”

Additional support

Recognizing the delays faced by CAURD applicants, partly due to private litigation that substantially halted the program until December 2023, Hochul also announced that Empire State Development would offer $5 million in micro-grants to eligible CAURD licensees. The one-time funding, with no repayment expectation if used for eligible purposes, will enable qualified CAURD licensees with a secured location to receive a grant for reimbursing certain initial costs incurred, her office confirmed in a statement.

Hochul also announced the launch of the Cannabis Enforcement Task Force next week, led by Christopher West, the state police’s first deputy superintendent. The task force is a wide statewide effort to coordinate multiple agencies in combating the illicit cannabis market. State police will spearhead criminal enforcement targeting cannabis trafficking and large-scale criminal enterprises surrounding merchandise found in illegal shops.

OCM will lead a robust civil enforcement effort with more than 150 inspectors from various state agencies dedicated to padlocking as many illicit cannabis stores as possible over the next 90 days. All illegal stores statewide can expect inspections and padlocking if deemed an imminent threat to health and safety, the office said.

“I will say one of the great successes of this task force is the ability to point to the problems, which I think we all knew in some level that things were not working the way that they needed to,” Moy said. “And we could see them from the staff who were frustrated they couldn’t find better solutions.

“Everyone wants the OCM to be successful. We want it for their staff, we want it for the leadership, and we want it for the New Yorkers who want to see this industry thrive. It’s important. So, when we make that commitment, it requires that all of us work together,” Moy added.

Hochul’s announcement comes as New York’s legal cannabis industry has struggled to take off, with fewer than expected dispensaries open statewide and many farmers sitting on unsold crops, prompting lawsuits and legislative hearings, with critics blaming regulators for the slow rollout.

Hochul, who has faced serious pressure to intervene, pledged to get the program back on track.

“The best thing we can do for the farmers for this growing season is to have a legal outlet for that product,” Hochul said. “That is why I also approach this with the urgency that’s required. We realized that this November tranche was supposed to result in plentiful business for those farmers this year. It got jammed up; didn’t happen. So, now our focus is unleash those opportunities.”

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