HdL Companies not best choice as cannabis consultant for the City

HdL Companies is the consultant the City hired to help it through ordinance development. A three-part report just released by Marijuana Business Daily exposes the divisions HdL has created within the cannabis industry and between the industry and local governments.

By virtue of being in the right place at the right time, HdL has become the dominant player in shaping the state’s cannabis market. Local governments rely on it to provide all manner of cannabis related services, from writing ordinances and tax ballot measures, to application development and scoring, to compliance inspections and financial audits. And, according to HdL, it’s making money hand over fist, earning $3.5 billion for its assistance to at least two thirds of California cities and counties.

Many of HdL’s defenders say it provides the best answer to cities and counties afraid to tackle the intricacies of regulating cannabis business. How to manage taxes, what are best practices, how to write good regulations that guard against future litigation are all concerns for local jurisdictions.

However, critics within the cannabis industry point to HdL’s questionable tax rate recommendations and control over prospective licensees. Detractors also point to scandal around David McPherson, HdLs Cannabis Compliance Director, HdL’s ties with law enforcement, and plain old-fashioned corporate greed as reasons why local jurisdictions shouldn’t contract with it.

• “‘They have a mercenary attitude. In it for the money, not about the success of small businesses,’ said Omar Figueroa, an industry attorney based in Sebastopol. ‘It’s all about getting those consulting contracts. They don’t care about establishing a successful system.’”

• “Sacramento-based consultant Jackie McGowan, who has been one of the more vocal of HdL’s detractors, blames the firm for a series of high local tax rates that were established in places such as Monterey County and municipalities including Coachella, Greenfield, Marysville, Moreno Valley and Salinas. ‘They really were the first third-party company to advise municipalities on how to regulate,’ she said. ‘And given that they got an early start in this, their pitch to cities was, ‘Look how much money you can make from the cannabis industry.’“ ‘And we’re still trying to undo the damage from that.’”

• “’The epitome of corporate greed’ was how HdL was described by Cody Bass, a former board member of the National Cannabis Industry Association and the executive director of Tahoe Wellness Cooperative. ‘(HdL) presenting as a credible source has really harmed the California industry,’ he said. ‘And hopefully from this point forward, the regulators and people in charge will start to listen to the people that actually operate in the industry.’”

The partnership between HdL, the League of California Cities and the California Police Chiefs Association is also a source of friction between HdL and the industry. The LCC has never been a friend to the cannabis industry, nor has the CPCA, which opposed Prop 64. Both have teamed up in a campaign to kill the statewide delivery proposal.

HdL’s hiring of Tim Cromartie, a former lobbyist for LCC, didn’t inspire a lot of trust, either. This was borne out in the exchanges between former mayor of Sebastopol Robert Jacob and Mr. Cromartie at our last Planning Commission meeting.

I guess the bottom line is, you can’t necessarily blame local jurisdictions for seeking experienced assistance to navigate the labyrinth of the cannabis regulatory process. But they must always move forward with eyes wide open and not accept any of Hdl’s advice at face value. They’re in business, just like anyone else, and they are going to try to upsell the city on any number of the other services they offer.

So, what’s the obvious phrase, here? Caveat emptor? Let the buyer beware.


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