Sacramento turns pot shops into taxed and regulated industry

November 15, 2010 

SACRAMENTO — In tense public deliberations over plans to rein in Sacramento's medical marijuana trade, Jeanne Larsson addressed City Council concerns earlier this year that her pot store was less than 500 feet from a middle school.

She pointed out there were two bars, a card club and several sex offenders' residences located even closer.

Last Tuesday, ending an arduous bureaucratic process, the Sacramento City Council passed an ordinance heralded as a capital cannabis compromise.

The new law will allow as many as 39 registered medical marijuana shops to seek special permits to stay in business. It will allow 32 of the shops to remain in their existing locations – even though virtually all of them violate new city rules banning dispensaries from being near schools, churches, parks, drug treatment centers and other pot clubs.

But Larsson and the operators of at least a half-dozen pot shops must move to locations that meet the city's strict new criteria. The City Council voted to allow marijuana stores only in areas already zoned for commercial or industrial uses.

Larsson's dispensary, A Therapeutic Alternative, situated near H and 30th streets in a Craftsman house with a backyard deck and pineapple tree, has to move because it's in a district zoned for offices and housing.

Larsson said she fears the dispensary, serving 3,200 medical marijuana users, may be unable to afford new city fees or the costs of moving.

In the pot shop's upstairs exercise room last week, Dennis Poupart, 49, an HIV patient and medical marijuana user, limbered up for a yoga class and lamented the shop's pending move.

Jonathan Batiz, 46, a fellow HIV patient, complained: "I don't want to purchase my meds in some back alley. Why should I move just because you have a problem with what my meds are?"

Larsson said it will be virtually impossible to find a new location in midtown that doesn't violate the city's rules. Any dispensary that moves must meet the new distance requirements.

Yet, Larsson praised the law.

"I believe it's a good ordinance," she said. "They (city officials) stepped out of their comfort zone in regulating us and allowing us. And I appreciate them for that."

Initially, city officials had considered allowing a maximum of a dozen pot shops.

Other dispensaries forced to find new locations that meet city approval include Sacsterdam University, Del Paso Health and Nutrition, Didacus Flower Company, R&R Coffee & Collective and River City Wellness Collective.

In its ordinance, Sacramento imposed more than $40,000 in startup fees on pot shops and a $12,600 annual licensing fee. Officials say the fees will cover the cost of the city's oversight of the dispensaries.

The City Council also is expected to impose a tax of up to 4 percent on dispensary gross receipts under Measure C, which was approved overwhelmingly by Sacramento voters Nov. 2.

City staff estimate that medical pot taxes could total up to $500,000 a year. But one of the city's largest marijuana stores, Canna Care, could pay $80,000 a year in city taxes alone, on top of $200,000 in sales taxes based on its estimate of $2 million in annual transactions.

Sacramento is one of at least eight California cities setting taxes for existing or future pot shops, showing the emergence of a taxed and regulated marijuana economy, despite the defeat of the Proposition 19 initiative that sought to legalize pot for recreational use.

"I think Sacramento is an excellent model and one that should be considered by other cities," said James Anthony, an Oakland attorney who advocates for medical marijuana businesses.

Sonny Kumar, co-founder of Sacramento's El Camino Wellness Center dispensary, said he is pleased the city is giving all its pot shops a chance to stay in business.

But he is bracing for new taxes. "Hopefully, we won't have to adjust our pricing too much," Kumar said. "I think our patient growers will have to understand that when they come to Sacramento, they're going to have to lower prices and be more compassionate."

Meanwhile, the city is requiring pot shops to provide extensive security, including manpower, video surveillance and other measures.

The ordinance bans on-site marijuana consumption and prohibits any felons from working in or operating dispensaries.

Lanette Davies, co-operator of the Canna Care dispensary, said some shops may go out of business because, "unfortunately, many people working in dispensaries have been busted for drugs."

But she praised city staff for looking after "the safety of the communities and also taking the time to make sure the dispensaries are safe."

Sacramento officials also are expected to draft rules for medical pot cultivation – determining where to permit it and to what extent.

Larsson is watching what may emerge.

"Ninety-five percent of the stuff (marijuana) I get is from Sacramento County patient growers," she said. "That should tell you why we need a cultivation ordinance."

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