Ill-Conceived L.A. Medical Marijuana Proposal Would Cost $36 - $74 Million In Tax Revenues

California NORML Release - Oct 26, 2009

A medical marijuana regulation ordinance proposed to the L.A. City Council by City Attorney Carmen Trutanich would cost $36 - $74 million in lost tax revenues plus untold additional enforcement costs, according to an analysis by California NORML.

The hastily written ordinance, which is being rushed for an early vote in November, would effectively shut down the city's medical marijuana distribution system by banning all sales of marijuana and sharply curtailing collectives' ability to grow and obtain medicine.

As a result, the city would forfeit millions of dollars in sales tax revenues that are currently being paid by the city's dispensaries. Other cities and counties that regulate dispensaries
allow them to sell to their members as non-profit collectives so long as they pay sales taxes.

California NORML estimates that there are currently some 100,000 to 200,000 medical marijuana patients in the Los Angeles area, generating some $400 - $800 million annually in retail sales. At this rate, banning sales would cost some $36 to $72 million annually in lost sales tax revenues.

A survey of California dispensaries by California NORML found that they pay an average of $82,000 per year in sales taxes. At this rate, some $74 million per year in sales taxes would be generated by Los Angeles' estimated 900 dispensaries.

In addition, Cal NORML's survey found that the average dispensary has 7.4 employees, so that closing 900 dispensaries would cost Los Angeles some 6,500 paying jobs.

No other city or county in California has successfully regulated collectives while banning sales. Contrary to claims by Trutanich, sales to members by non-profit collectives and coops are allowed under state law SB 420 (Health and Safety Code 11362.775) and the attorney general's guidelines.

The proposed ordinance would effectively make distribution of medical marijuana unviable in L.A. by limiting collectives to a single garden of 100 plants. This would limit collectives to serving a handful of members, requiring tens of thousands of collectives and grows throughout the city. Nothing in state law authorizes such limitations. Most collectives now serve hundreds or thousands of members and draw from many gardens.

Patient advocates are expected to sue if the proposed ordinance is passed, on the grounds that it would unconstitutionally limit patients' right to collectively cultivate and obtain medicine, as guaranteed under Prop. 215 and SB 420.

Patients also object to a provision in the ordinance that would ban cannabis extracts and edibles, which are legal under Prop. 215. Oral preparations are especially important for patients who want to avoid the respiratory hazards of smoking. Advocates argue that oral preparations should be available, but should preferably be prepared in county-licensed kitchens with appropriate labeling of contents.

Cities with successful dispensary regulations, such as Oakland, San Francisco and West Hollywood, are currently collecting millions in taxes and license fees from dispensaries. A recent poll by Mason-Dixon found that 77% of Angelenos favor regulated dispensaries.

"Los Angeles would be foolish to pass this unworkable, ill-conceived ordinance," says California NORML coordinator Dale Gieringer, "Not only would it cost $36 - $74 million in lost sales taxes and thousands of jobs, but the city can expect serious legal challenges in the courts. The city would be better advised to adopt a system of licensed regulation and taxes, which has proven successful elsewhere in the state."

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Dale Gieringer - dale@canorml.org
California NORML, 2215-R Market St. #278, San Francisco CA 94114
(415) 563- 5858 - www.canorml.org