Marijuana Laws Spur Small Businesses In Oakland, Elsewhere
ANGELA WOODALL - The Oakland Tribune

An incremental acceptance of medical marijuana has spurred a cottage industry of business ventures - from iPhone applications to lobbyists - whose expansion shows no sign of slowing despite the recession. Instead, pot is the new growth industry.

The market began to take off in 1996, when California became the first state to approve the sale of marijuana for medicinal purposes. Today, medical marijuana sales in California are estimated at $700 million to $2 billion per year. Profits from "canni-businesses" as a whole are potentially much greater.

"It is a social movement with cash flow," said James Anthony, an activist and attorney who has advised numerous dispensaries, of which there are at least 2,100 nationwide, according to the National Organization for the Reform of Marijuana Laws.

The group estimates that Californians alone consume nearly $6 billion of marijuana annually.

The money has always been there, Anthony said. It has just risen to the surface because people think there is less risk of being prosecuted.

The most obvious beneficiaries of what has been dubbed a "hempire" are dispensaries, growers and doctors, who charge up to $200 per consultation.

Newer are the small business ventures such as delivery services and publishers of books about how to start pot-related businesses. Pharmacologists are standardizing the safety and strength of the pot consumed in everything from lemon bars to olive oil.

Companies are preparing special machines, packaging and containers for the industry.

Hotels also are affected by cannabis-related tourism, conventions and competing trade shows that draw thousands to cities. And if anyone has trouble finding what they need, the iPhone and iTouch offer a cannabis application that allows users to locate resources worldwide.

Media involved with pot also have expanded. The Web-based station "Marijuana Radio" has been featured on the front page of the iTunes comedy podcast section, and the Denver Westword news weekly went further by posting a help wanted ad for a reviewer of Colorado's marijuana dispensaries and their products.

In addition, the number of pot lawyers and political consultants have exploded, and a half-dozen marijuana lobbying groups have sprung up in Washington, D.C., a few on K Street. Oakland activist Richard Lee said he spent more than a $1 million gathering signatures for a measure that would permit adults to possess cannabis for personal use and allow local governments to tax it.

Cannabis has become a regular political issue instead of just a crazy, hippie dream, Lee said. His "Oaksterdam University" was the first cannabis college. There are now at least a half-dozen in California, and others are looking at creating online versions of the classes available for about $50 a seminar.

Lee said last year he took in between $4 million and $5 million from his businesses, which also include an advertising agency, a tour company, a bicycle rental and glassblowing business, a gift shop selling souvenirs and merchandise, and the Bull Dog Caf̩ in downtown Oakland. (Visitors can take an "Oaksterdam" tour of the city's cannabis dispensaries through Segway of Oakland.)

The Harborside Health Center, an Oakland dispensary that offers numerous services, had about $20 million in gross revenues last year and expects to pay $400,000 in taxes to Oakland in 2010, according to founder and longtime activist Stephen DeAngelo. He employs 76 full-time workers, up from 43 in 2008.

"We are seeing the first stages of this industry that has been in the shadows come into the light," said DeAngelo, a longtime advocate for cannabis legalization. "A legal cannabis industry would be a huge economic benefit."

Those potential benefits have prompted cash-strapped cities and states to take another look at marijuana. Oakland in 2004 became the first city to license medical cannabis outlets. That year, the city's four licensed dispensaries reported $26 million in revenue. Advocates projected income to reach $64 million in 2009.

Those numbers are dwarfed by the $280 billion pharmaceutical industry. But the pot-based figures were enough to convince Oakland voters in July to approve a tax on the proceeds of medical marijuana sales that could raise $300,000 per year for the city.

Advocates also were heartened recently by signals from President Barack Obama's administration that federal authorities were backing off pursuing smokers or distributors of medical cannabis as long as they operate according to the laws of their state.

That does not mean selling marijuana is legal or that the patchwork of local, county, state and federal law has been coordinated. But, DeAngelo said, "it is a significant change."

"Every day I went to work," he said, "I didn't know if I would be going to prison or coming home at night."

Golden State's green future
By Josh Richman
Oakland Tribune
Posted: 10/31/2009 01:39:55 PM PDT
Updated: 11/02/2009 07:35:32 AM PST

Just in from Stockton, Mary parks her car and enters the downtown Oakland coffeehouse — but she hasn't come all this way for a cup of joe.

Instead, she peruses a menu of dozens of strains and preparations of marijuana, all grown in California, all taxed, all legal. Producing a wad of cash and proof of her age — but no doctor's note — for a fragrant ounce of "purple kush," she departs a satisfied customer, perhaps grabbing a snack at a nearby restaurant before hitting the highway.

This could be California's near future, what with three marijuana-legalization initiatives in circulation for the November 2010 ballot. A legislative bill is pending as well, although it's being revamped by its author.

Groups such as the National Association for the Reform of Marijuana Laws and the Marijuana Policy Project favored waiting at least until 2012, when a presidential vote might mobilize a younger, more progressive electorate. But these measures' proponents believe shifting attitudes and the economic crisis make 2010 the time to act.

They say legalization makes fiscal sense as well as moral sense — ending the centurylong practice of criminalizing a widely used substance that's less harmful than alcohol, America's legal drug of choice. They tout an immediate, massive savings in state and local law enforcement and corrections costs, and perhaps significant new revenue; a state Board of Equalization study found California could reap $1.3 billion a year from licensing and taxing what's already its biggest — albeit off-the-books — cash crop, if the federal ban on marijuana is lifted.

But many in law enforcement contend whatever money is saved and made wouldn't be worth the harm done to communities.

Measure of movement

Of the three ballot measures seeking petition signatures, the one with the most money and buzz behind it would legalize personal cultivation and use but would let local governments choose whether to allow commercial cultivation and retail sales of up to an ounce at a time, creating a patchwork of "wet" and "dry" cities and counties.

"It's up to the local jurisdictions for what works best, just as we have alcohol laws," said co-proponent and Oaksterdam University President Richard Lee, who could see his business — providing "quality training for the cannabis industry" — grow exponentially if his measure passes.

Co-proponent Jeff Jones directed the now-defunct Oakland Cannabis Buyers Cooperative and now runs its successor, the Patient ID Center, in Oakland and Los Angeles. They've hired a professional petition drive management firm, and went in expecting to spend about $1 per signature.

"We got 206,000 in the first three weeks, so that's about 32 percent in 14 percent of the time," Lee said. "We think we'll be done maybe a little after Thanksgiving at the rate we're going. People have been ripping the petition blanks out of our hands, they're so eager to sign them."

But would marijuana be sold in coffeehouses, in dedicated stores, in liquor stores or in a neighborhood drugstore? Where and when could one smoke? What kind of advertising would be permitted? Could California employees of national companies be fired for testing positive for cannabis? All these questions and many more would be left up to state and local lawmakers.

Lee hopes places that choose to allow, regulate and tax commercial sales — most likely the more liberal, coastal areas at first — would adopt a "coffeehouse" model like Amsterdam's, which proliferated for a while in Oakland under California's medical marijuana law. Such businesses balance sensitivity to the community with knowledgeable customer service, better than impersonal mass-market retail sales, he said.

Nation vs. states

The wild card is federal law, which still bans all cannabis cultivation, use and sale. The Obama administration advised federal prosecutors last month not to pursue medical marijuana patients and providers adhering to their states' laws. But while health is often constitutionally considered to be within states' purview, interstate commerce and control of dangerous drugs has been federal territory, and there's no telling whether the first county to authorize a big, commercial farm growing marijuana for recreational use would see it immediately busted by the Drug Enforcement Administration.

All the measures' proponents hope legalization in California — a state comprising about 12 percent of the nation's population, and a higher percentage of its agriculture and commerce — would lead other states and eventually the federal government to do the same. Until then, California once again would be a trailblazer, with all the potential headaches accompanying that distinction.

Those headaches would include increased drug abuse and its accompanying crime, according to law enforcement officials who testified at an Assembly Public Safety Committee hearing Wednesday in Sacramento.

Committee chairman Tom Ammiano, D-San Francisco, in February introduced a bill that would legalize marijuana cultivation, sales, possession and use by adults, regulating it somewhat like alcohol; Wednesday's hearing was to gather input as he rewrites the bill to address concerns raised this year.

Officials from various law enforcement agencies and associations testified that legalization under any scheme could lead to more, not less, use by children; more people driving under the influence, causing more injuries and deaths; decreased worker productivity that could hurt the economy; and the continuance of a thriving black market. California Peace Officers' Association President John Standish said there's "no way marijuana legalization could protect or promote society — in fact, it radically diminishes it."

After the hearing, Sally Fairchild — deputy director of the Northern California High Intensity Drug Trafficking Area, who had testified on behalf of the California Narcotic Officers Association — said a wet-and-dry county scenario like that envisioned by Lee and Jones' measure would be "unenforceable" as a practical matter. Any county choosing to regulate commercial cultivation and sale will become "the dope dealer for that region," fueling rampant black market operations.

Cops aren't only critics

Some say Lee and Jones' measure doesn't go far enough. Dennis Peron, a proponent of 1996's successful medical marijuana ballot measure, Proposition 215, recently likened limits set by Lee and Jones' measure to a hypothetical law allowing only one bottle of wine in a home: "These limits guarantee confusion, harassment and black marketeering forevermore."

There's no exception from the prohibition on "smoking cannabis in any space while minors are present" for parents in their homes, he noted in a recent statement. "We don't lock up parents for having a glass of wine with dinner, and we certainly don't tell the kids to leave the house for the purpose of consuming any other substance, so why start with cannabis?"

And taxation would maintain cannabis "as the most expensive, blatantly overpriced product on the market thus forcing most people to choose cheaper, more dangerous drugs," Peron wrote. "Surely we can do better than this. How about just legalizing it?"

Alternative views

Another proposed ballot measure seems closer to that scenario. One of its proponents, San Francisco attorney James Clark, was helping Lee and Jones draft their measure when he hit upon what he believes is a better plan.

Lee and Jones' limits on personal cultivation and use encourages "very much a commercial model, very much keeping prohibition alive," Clark said, while his proposal seeks to "make this like soybeans" so anyone can grow and use as much as they want for themselves, which he believes will actually reduce demand in the long run. Commercial cultivation and sales would be licensed and taxed; Clark envisions big farms furnishing cannabis products to retail outlets — perhaps liquor stores, perhaps drugstores.

Clark said his measure "was never meant to be a really viable petition," lacking funding and full-time staff members, but "we're really starting to get traction. "... If our growth continues to be exponential, it's possible we'll make the ballot." He acknowledges, however, that Lee and Jones' measure is more likely to qualify.

John Donohue, 84, of Long Beach — a marijuana user since 1946, embittered by his five arrests for the drug — offers another measure, co-authored with longtime marijuana and Peace and Freedom Party activist Casey Peters, of Los Angeles. Donohue said they tried to keep it simple — specifics of taxation and regulation would "just have to be worked out in the process" — and hoped people would get behind it, but their petition drive has stalled as Lee and Jones' measure gets most of the exposure.

"(We are) giving various interviews and telling people what our position is and hoping we can start a movement," he said. "The main point is: Stop arresting people for a non-crime. I have bumper stickers that say, 'Show me the crime.'"‰"

The next Budweiser?

Ultimately, any legalized marijuana scenario will have pluses and minuses, says Mark Kleiman, professor of public policy and director of the Drug Policy Analysis Program at the UCLA.

"How much different does it look than today? You don't have to get a phony doctor's recommendation," he said. "How much bigger would the market be than it is today? There's no way to tell."

But Kleiman predicts it would be bigger, especially if commercial advertising — print, online, radio and television ads, billboards, catchy jingles — becomes commonplace.

"Do we get brand names? You can imagine this becoming like the liquor industry," he said. "I don't think it's the end of the world. But if we go the whole commercial route, I think you will have more drug abuse."

If a million more Californians take up marijuana use, "we'll have another 100,000 pretty screwed up on it. Being screwed up on marijuana might not be as bad as being screwed up on alcohol, but it's still bad enough," Kleiman said. "Unlike some people, I don't think the stuff's harmless."

Yet, with careful regulation and steps to avoid commercialization, California could do far worse, he said. "Do I believe the state could get half a billion out of this (in taxes)? Yeah I do. Do I think it could also save a couple of hundred million (on law enforcement)? Yes, probably."

The plans to legalize pot

Assembly Bill 390: Introduced in February by Assemblyman Tom Ammiano, D-San Francisco, it would legalize marijuana cultivation, sales, possession and use by people 21 and older, regulating it somewhat like alcohol. A license to grow for sale would cost $5,000 to start and then $2,500 to renew each year, and a $50-per-ounce tax would be placed on retail sales. Ammiano said he hopes this would bring upward of $1.4 billion per year for drug abuse prevention efforts. No taxation would occur unless the federal marijuana ban is lifted; otherwise, the bill's only effect would be legalization of personal cultivation and use. Ammiano held the bill in committee this year, and is now rewriting it to put it forth again in January.

The Regulate, Control and Tax Cannabis Act of 2010: Proposed by Oakland marijuana activists Richard Lee and Jeff Jones, it would legalize personal possession of up to an ounce of cannabis and up to 25 square feet of cultivation per home. It also would give local governments the option of whether to permit, regulate and tax commercial sales, a system akin to show alcohol is or isn't sold in "wet" and "dry" counties in some states. This seems to be the measure to watch; the proponents say their petition drive is surging, and its endorsements include that of Oakland mayoral candidate and former state Senate President Pro Tem Don Perata. For details, go to Tax Cannabis 2010.

The Tax, Regulate and Control Cannabis Act of 2010: Advanced by proponents Joe Rogoway, Omar Figueroa and James Clark, all of San Francisco, it would legalize personal cultivation and use without limits, but would require -- not just allow -- state and local governments to regulate and tax commercial marijuana cultivation and sales. Tax revenues would have to be spent on education, health care, environmental programs, public works and state parks. For details, go to California Cannabis Initiative: The Legalize, Regulate and Tax Marijuana Initiative.

The Common Sense Act of 2010: Advanced by proponent John Donohue, of Long Beach, it would require the Legislature to adopt laws regulating and taxing marijuana within one year, but would let local governments choose whether to also tax marijuana's cultivation, sale, and use. For details, go to Home.