Dispensary Issued San Francisco’s First Equity Cannabis Business Permit to Open Jan. 25
The storefront of Eureka Sky at 3989 17th Street in San Francisco
Photo courtesy of Ray Connolly

Dispensary Issued San Francisco’s First Equity Cannabis Business Permit to Open Jan. 25

Eureka Sky, owned by gay couple Ray Connolly and Desmond Morgan, will serve the city’s Castro District.

January 24, 2020

After trying for years to open a cannabis business in San Francisco, Ray Connolly and his husband, Desmond Morgan, will open the doors of their first dispensary, in the city’s Castro District.

“We’re two married gay men opening up a dispensary in the heart of the gay neighborhood, so the mapping of it is really perfect,” Connolly says.

Eureka Sky, which opens Jan. 25 at 3989 17th Street, received the first equity cannabis business permit issued by San Francisco’s Office of Cannabis. The roughly 2,300-square-foot dispensary storefront is owned by Connolly, Morgan and equity partner Chris Callaway. Equity partners and owners in San Francisco have been negatively impacted by cannabis prohibition or meet other criteria that allows them to receive government support as they enter the cannabis industry.

With plans to be open from 10 a.m. to 10 p.m., seven days a week, Connolly says Eureka Sky will sell flower, edibles, pre-rolls, concentrates and CBD pet products. The company has hired a chief technology officer, Steve Delavan, as well as a buyer, and plans to soon hire a staff of budtenders.

Connolly’s and Morgan’s decision to open a dispensary has roots stretching back decades. Both their fathers and Morgan’s stepfather died of cancer when they were young. These members of the older generation didn’t consume cannabis, and Morgan notes it wasn’t legally made available to them. But more recent medical studies stating the benefits of cannabis, including for cancer patients, helped prompt Connolly’s and Morgan’s decision to join the industry.

“I'm a longtime cannabis supporter and user, but it was one of the compelling events when the results started to come on just around the medicinal use, that we decided to get into the cannabis industry,” says Connolly, who worked as a software executive for 23 years.

Morgan, who was employed in the pharmaceuticals and biotech space for about 20 years, learned about the endocannabinoid system more than a decade ago while employed at a company that worked on a diet pill.

“I think cannabis has got such a bad rap for the longest time, because it was just clumped together as being a drug,” Morgan says. “Yet a lot of people don't realize the medicinal benefits of cannabis and that our bodies have our own mechanisms [for receiving it] in terms of the endocannabinoid system — it's all natural.”

Photo courtesy of Ray Connolly
Eureka Sky's interior

In addition to Eureka Sky, Connolly and Morgan plan to open a second dispensary, called Sea Weed, in Fisherman’s Wharf. They and equity partner John Wood are still building out the space but plan to open in March.

Pending the receipt of a permanent permit, Connolly and Morgan aim to open Sea Weed at 2627 Taylor Street. It’s the same address where they tried to set up a medical dispensary in 2015, prior to the passage of Proposition 64, but, Connolly says, were driven out by surrounding businesspeople who opposed a cannabis shop in the neighborhood.

“At that time, the merchants of Fisherman's Wharf literally rented a Greyhound bus, and they had their employees and the owners and managers all go down to city hall and fight it,” Connolly says.

In the intervening years, San Francisco examined the economy of Fisherman’s Wharf and learned that having one or multiple dispensaries to serve tourists and residents could be beneficial for the neighborhood, Connolly says. “When I went back to them the second time, they had a different point of view of opening up a cannabis dispensary,” he says.

Equity in San Francisco’s cannabis program

In San Francisco, permits are currently only being issued to equity applicants, equity incubators and operating cannabis businesses.

To apply for a permit, equity applicants must first be verified with the Office of Cannabis. And to be verified, prospective applicants must meet the following criteria:

The verification process for prospective equity applicants opened in March 2018, and the Office of Cannabis began accepting applications in May of that year, according to a spokesman from the office. As of Jan. 23, 325 equity applicants have been verified, the spokesman says.

Once they are verified, applicants will then take steps such as work with San Francisco Planning to find a location, register with the city and state, consent to a background check and disclose ownership materials, according to the Office of Cannabis website. Furthermore, they must follow multiple security steps, and apply for and receive city permits from departments such as Planning and Building Inspection.

Three permanent equity permits have been issued, to Eureka Sky, Berner’s on Haight and the California Street Cannabis Company, according to the Office of Cannabis’ website.

More information about equity applications, including about equity goals and setting up compassion programs, can be accessed at the Office of Cannabis’ website.

In Connolly’s and Morgan’s situation, equity partners Callaway and Wood approached them about working together, Morgan says. Callaway was arrested in 2000 for cultivating cannabis for the terminally ill, according to hoodline.com. Wood also had previous ties to cannabis; he was good friends with renowned cannabis activist Dennis Peron, Connolly says. (Both Callaway and Wood were unavailable for interviews before Cannabis Dispensary’s deadline for this story.)

As more municipalities legalize cannabis, Connolly says San Francisco’s equity program can provide a model for helping the people who played a role in creating the industry when it was still a black market.

“There are individuals who have been impacted by things that had transpired in their lives because of cannabis, that may have found themselves not being able to get jobs or not being able to keep jobs,” Connolly says. “So, this is a program where business owners like Desmond and I can actually help the individuals that helped build the cannabis industry.”

Software for San Francisco’s equity applications

To streamline the review and processing of equity applications, the City and County of San Francisco has teamed up with government technology company CityBase. San Francisco already used CityBase’s management and payment tools, so it asked the company to see if they could be used for cannabis permitting.

The system’s software gives applicants unique identifiers and allows to fill out documents without having to continually repeat steps, says Josh Goldstein, CityBase chief product officer. At the same time, various city departments involved in the application and permitting process, such as Planning, Fire and Police, can log in and access pertinent information.

Having a simple and reliable system for processing applications and issuing licenses and permits helps San Francisco address equity in the cannabis space, Goldstein says.

“Part of it, I think, is just really just making the user interface simpler, I think is a step toward equity in and of itself, because you're inherently penalizing businesses that have less resources — smaller businesses,” he says. “The more regulatory barriers you have up, the more you're discriminating against those, in my opinion.”

Replacing outdated or manual systems can allow governments to provide more equity to businesses and residents, says Liz Fischer, CityBase chief customer officer, adding that her company’s work with San Francisco on cannabis applications, permitting and licensing is an explicit example.

“What's interesting to me, as someone who works with local government clients and tries to solve the access and equity equation from a lot of different perspectives, is these problems are relevant to every person doing business with local government,” Fischer says. “But because cannabis is newly legalized and is therefore a new business industry … the government side has a chance to consider these things from the ground up, like the entire permitting process, licensing process and the steps in that process that either aid or prohibit someone from participating.”