Growing pains - Page 2

Oakland and other Bay Area cities move to regulate and tax medical marijuana cultivation

The marijuana business is booming in Oakland and other Bay Area cities, now local governments are seeking a piece of the action

On May 21, Wilcox and his company, AgraMed, released a report showing how the facility could produce about 21,100 pounds of high-grade marijuana per year, generating about $60 million in gross sales and more than $2 million a year in taxes for Oakland, assuming a 3 percent tax rate (or about $3.5 million if the rate is set at 5 percent). The report was based partly on information gathered from independent local growers.

"By closing the loop and regulating the entire industry, we can ensure the healthy production and use of cannabis, and ensure its legitimate standing in our society. We're working with public health and public safety agencies to make sure we do this right," Wilcox, who did not return Guardian calls for comment, said in his press release.

Anthony said he was wary of Oakland politicians handing so much market power to one person: "It's not for the government to pick the winners and losers through a regulatory scheme." But he does agree that growers are overdue for regulation. "It's time for cultivation to come into the light."

State law requires growers to be part of the collective that uses or distributes the product, and the facility proposed by Wilcox would contract with many collectives, a model that hasn't been tested in the courts yet. In fact, Council member Nancy Nadel has expressed concern that what she called "a structurally flawed proposal" could be on shaky legal ground (City Attorney John Russo, who has endorsed Prop. 19, did not return our calls with questions about the Oakland measure's legality. His office also has not issued an opinion because it conflicts with federal law).

"Though state law allows for the operation of medical marijuana cooperatives by primary caregivers and patients, it does not legitimize large-scale growing operations. Just in the past few months, the DEA has raided two medical cannabis testing labs in Colorado. We need to retain a level of good sense and discretion," Nadel wrote in a July 13 memo to her council colleagues, urging them to hold off on approving the measure until after voters decide Prop. 19 in November.

Yet Kaplan told us that even though the council moved the legislation forward, staff would continue to work through its myriad regulatory details and no permits will be issued until January. She also agreed that "it's really important for Prop. 19 to pass," giving Oakland more explicit authority to regulate the industry.

Oaksterdam University founder Richard Lee, who bankrolled the campaign to place Prop. 19 on the ballot, supports Kaplan's regulations (although he told us he would like to see a greater focus on small cultivators) and called regulation of growers "a historic next step" that further legitimizes the industry.

"I think this will help Prop. 19 pass and help Oakland be ready when it does," Lee said, voicing support for Wilcox and other business people who seek to join this movement. "We need everyone we can get on our side."

Most polls show that Californians are split fairly evenly on Prop. 19. Even so, several California cities are already making preparations to use the new taxation and regulation authority that the measure would bestow.

Lee said Sacramento, Oakland, Stockton, Long Beach, San Jose, and Berkeley all have been working on cannabis regulatory schemes for voters to approve. For example, on July 13, the Berkeley City Council placed a measure on the November ballot proposing a gross receipts tax of 2.5 percent on medical marijuana and a 10 percent tax on recreational pot, as well as a system for permitting up to 10 medical marijuana growing operations.

"State law is really a mess at the moment and there are a number of things happening now that violate state law," Lee told us. "That's why Prop. 19 is going to be a cleanup law to deal with a lot of the stuff that's going on now."