Pubdate: Sun, 20 Oct 2013 Source: Desert Sun, The (Palm Springs, CA) Copyright: 2013 The Desert Sun Contact: http://local2.thedesertsun.com/mailer/opinionwrap.php Website: http://www.mydesert.com/ Details: http://www.mapinc.org/media/1112 Note: Does not accept LTEs from outside circulation area. Author: Xochitl Pena Page: A1 THE MEDICAL MARIJUANA INDUSTRY FLOURISHES, CREATING JOBS AND CONTROVERSY, AS PALM SPRINGS VOTERS WEIGH AN UP TO 15 PERCENT TAX ON THE CITY'S DISPENSARIES Ripe marijuana plants growing under the glow of fluorescent lights on a wooden farm-style table wait to be plucked. The thick, skunk-like smell of cannabis fills the back room of Organic Solutions of the Desert, and will linger on clothes hours afterward. The buds, once separated from the leaves, will be packaged and labeled with names such as Diablo, Earthshaker or Karma Krush, then made available to 6,000 dispensary members to alleviate everything from chronic body pain and anxiety to depression and HIV side effects. "The industry has come a long way," said Jim Camper, owner and CEO of the Palm Springs medical marijuana collective. "People are wanting alternative forms of medicine. They are tired of taking prescription pain meds and seven different antipsychotics." The leaves left behind aren't thrown away. In this burgeoning business, the entire plant is used -- for salve that can be rubbed on joints like Bengay, or liquid drops that can be added to drinks or placed under the tongue. Some is donated to vendors to make edibles, such as brownies, cookies, candy bars, and lollipops. "There's a whole range out there, and a lot of that stuff comes from the trimmed stuff," Camper said. "Nothing goes to waste." Legal dispensaries in Palm Springs are part of a $1.5 billion-plus marijuana industry in the state that is flourishing and spinning off niche entrepreneurs catering to medical needs. The industry could expand even more if California follows Washington and Colorado, states that a year ago endorsed legal marijuana for recreational use as well as medicinal. On Thursday, a panel headed by California Lt. Gov. Gavin Newsom announced the group will study legalization, including safety, regulation and taxes that could produce billions in revenue. It's too early to say how much Washington and Colorado will generate in new income, but according to a fiscal statement released last month by Colorado's Legislative Council, state revenue from taxes could increase by $33.5 million this fiscal year and $67 million next fiscal year if a tax proposal on retail marijuana is approved next month. "This is a very profitable business. Make no mistake about it," said Palm Springs Mayor Steve Pougnet, who voted to allow a limited number of legal marijuana dispensaries in 2009 and was part of a unanimous council vote in July to try to access more marijuana tax dollars. On Nov. 5, voters will be asked to place up to a 15 percent gross receipts tax on legal and illegal marijuana dispensaries. "We don't think there's a huge amount of money ... that's at play right now," said Palm Springs City Attorney Doug Holland. "I think we've talked about a figure of $500,000 to maybe a million. That's just a guesstimate." In comparison, the top sales tax generators for the city are restaurants and bars, bringing in $5 million combined. The second are service stations, at $2.6 million. Other cities across the state levy special taxes on dispensaries. Oakland, which has a 5 percent tax, brought in $1.4 million in 2011; San Jose, with a 7 percent tax, got $3.6 million during fiscal year 2011-12. There are reports of more than 1,000 medical marijuana dispensaries across the state. They operate under the auspices of the Compassionate Use Act approved by California voters in 1996, which allows the dispensing of marijuana to people with a doctor's permission -- despite federal law that says marijuana possession and use is illegal. Statewide, the California Board of Equalization collects between $58 million to $105 million in sales taxes from dispensaries annually, based on estimates of between $700 million and $1.3 billion in total sales. In just sales tax, Palm Springs collected $29,186 for the 2012-13 fiscal year from legal and illegal dispensaries. Illegal dispensaries, like any other business, still have to charge sales tax and report it. Palm Springs is the only city in Riverside County to allow medical marijuana dispensaries, but limits the number to three. A fourth license is in the planning stages, attracting numerous suitors to a potentially lucrative opportunity. The dispensaries in Palm Springs are required to operate as nonprofit collectives, meaning they are owned and operated by patient members. If the state were to ever legalize marijuana, though, medical cannabis clubs will cease to exist, said Lanny Swerdlow of Whitewater, a registered nurse and president of the Inland Empire Chapter of the Marijuana Anti-Prohibition Project. "There's other people that say 'oh no, medical marijuana will continue' and I respectfully disagree. If it's legal, you won't have to get a doctor's recommendation anymore. It's going to be much cheaper than it is now," he said. Under the radar Unlike other sales tax ballot measures -- such as Measure J, which was approved in 2011 for redevelopment projects -- Measure B has not spurred major public discourse or uproar. Discussion has been confined to City Council meetings and candidate debates. No argument against the tax has been filed with the Secretary of State to appear on the ballot. The collectives have not contested it with the officials that allow them to exist in the first place. Camper, however, does have a petition that patients can sign at his collective if they oppose Measure B. "We are against any tax money being placed in a general relief fund," the petition reads. The money "should only be used to regulate this industry and educate the population. A regulatory board should be formed and money used for that purpose." It further asks the city to outline exactly what the money will be used for and how much money will be generated, because Camper and others say the request is too vague. The measure only needs a majority vote to pass, and the money would go into the general fund, which is used to pay for any kind of city service, from salaries to street sweeping. If the City Council specified that the money would go to a certain cause -- in this case, dispensary regulation -- the measure would need a two-thirds majority for passage, a much harder standard. Measure J is a 1-percentage-point sales tax increase, approved to generate money for the Desert Fashion Plaza redevelopment project and other city projects. It was also a general tax and passed with a majority vote, with the money going into the general fund. Though city officials have vowed to only use Measure J money for infrastructure and capital improvements, attempts to buy open space and help pay for business incentive programs have raised questions from residents. According to Holland's analysis of Measure B, which voters will see on the ballot, the money would be available for general municipal services, including "police protection and crime suppression services, fire prevention and suppression services, and emergency medical." The Measure B ordinance says that up to $15 will be charged for every $100 in proceeds from the dispensaries, though the council could decide on a lesser amount. "Proceeds" is defined as "gross receipts of any kind, including without limitation, membership dues; the value of in-kind contributions; reimbursements provided by members regardless of form; any payments made; and anything else of value obtained by a cannabis or marijuana collective." David McKinley of Palm Springs, who has used medical marijuana for about a year to battle side effects from the 17 pills he takes daily to deal with AIDS, is worried about the tax -- even though it's on the collective operators and not the patient sales. "This tax is going to affect the patients at the end of the day. Just like taxes at the gas pump ... it ends up going down to whoever uses that product," he said. Camper said he will do everything he can to keep his costs down, but as in any business, when new fees are imposed, it almost always is carried on to the consumer. "If we could limit the tax to 5 percent, it would be much less of a burden," he said. The City Council unanimously voted to place Measure B on the ballot on July 3 and council members have stressed that the tax is on the operator of the dispensary and is not intended to be passed on to the patient. "Palm Springs is the only city in the surrounding area to allow medical cannabis to ensure an alternative form of treatment for debilitating medical conditions," Pougnet said. "The measure ... will provide some needed funding from the collective operators for local law enforcement and critical city programs to ensure Palm Springs residents are not negatively impacted." Camper, though, doesn't think it's right to charge the legal dispensaries for the city's efforts to close illegal operations. "I don't see where we're costing them anything," he said. The city spent about $500,000 to close down most of the illegal dispensaries, according to the city's attorney. Now the city is working on closing down illegal delivery businesses that have sprouted up. Palm Springs started shutting down illegal operators even before the California Supreme Court ruled in May that cities and counties can ban collectives. The ruling emboldened the city's effort to regulate the industry. At one point, the city had more than a dozen illegal dispensaries across the city. An industrial neighborhood south of Ramon Road and west of Gene Autry Trail was referred to as "Little Amsterdam." "We're going to work hard to pass Measure B. That gives us a lot more ability to regulate. We spent an inordinate amount of money from the city on regulating the legal ones and ... even more money on the illegal ones that have popped up," said Councilwoman Ginny Foat, a proponent of medical marijuana collectives. Since Palm Springs allowed a few to operate legally, other dispensaries thought it was OK to set up shop in the city, said Swerdlow, whose now-shuttered Riverside dispensary was the subject of the state Supreme Court ruling. "I don't know why some of these didn't open up in Indio ... The problem is Palm Springs had to sit there and bear all the legal expenses," he said. Cathedral City, Palm Desert and Rancho Mirage had a few illegal dispensaries, and closed them down. In June, Cathedral City's council mulled the possibility of lifting its ban on dispensaries, but decided to hold off until a permanent city manager is hired. Mayor Kathy DeRosa said she has no idea when those talks will resume. If Cathedral City's ban is lifted, some Palm Springs dispensary operators say their business will suffer, especially if their proceeds are heavily taxed. Swerdlow, though, said Cathedral City likely would impose a tax of its own. Green origins Of the three legal dispensaries currently operating in Palm Springs, in June 2010 Desert Organic Solutions was the first to serve patients. Eleven dispensaries each paid $7,500 to apply for what was initially two available licenses. The rigorous application process, which took more than a year, included street parking requirements, site and floor plans, security systems and background checks. The city, delving into a new world, had no idea how much the process would cost. In the end, it was between $2,500 to $5,000. The difference was reimbursed to the dispensaries. "They asked for a lot of stuff," said Gary Cherlin, president and CEO of Desert Organic Solutions. "I just remember being happy. I had put a lot of time and effort into it." Cherlin, a medical marijuana patient who uses the drug to cope with anxiety and depression, had never operated a dispensary. The Rancho Mirage resident entered the industry after seeing how edible marijuana helped friends and his grandfather, who had cancer, deal with nausea. "I did research and found out things like medical marijuana had been used for thousands of years, and it intrigued me," said Cherlin. "I really believe in it." In his application, he estimated starting with about 100 patients. On his first day he had 75 people show up and now has a database of about 7,800 patients. CannaHelp was originally approved for a permit alongside Cherlin, but after about a year and a half, went out of business. The available license was awarded to Camper's collective. C.A.P.S. was selected in April 2012 when the City Council decided to expand to three dispensaries. In a very busy plaza alongside Gold's Gym, C.A.P.S. likes to stay out of the spotlight. Dean Weber, 53, who only would say he's from the Coachella Valley, is a common fixture outside. He's a patient, but also serves as security, making sure gym clients and others visiting the plaza aren't taking up parking spaces reserved for C.A.P.S. patients. And he's there to open the door for all who visit. "I do make sure the patients get to and from their cars. There's a lot of traffic. When I'm here, there's no problems," he said. The dispensary also gives out a welcoming gift to patients -- a pipe, rolling papers, lighter and a business card in plastic. C.A.P.S. doesn't have a grow room like Organic Solutions of the Desert, but is talking to the city about expanding to include one. C.A.P.S. acquires its cannabis from patients who grow it. Cherlin said he gets folks from Los Angeles who drive to his store for cannabis-infused ice cream that comes in mint, strawberry, banana and chocolate chip. Another draw is his stock of Indicas -- a type of marijuana that has a higher level of Cannabidiol or CBD, said to specifically help insomnia, anxiety, chronic body pain, plus arthritis and joint pain. This strain typically produces more of a body buzz and makes people sleepy rather than psychoactive. "It's really something that is up and coming. It's great medicine," he said. The other variety of marijuana is Sativa, which has a higher level of THC or tetrahydrocannabinol. Sativa produces a psychoactive high that stimulates appetite and helps depression, headaches, nausea, chronic pain and social disorders, according to the collective. The anxious or paranoid feeling some people get is often from marijuana with high levels of THC. Patients also can order cross-breeds of Indica and Sativa. For Don Anderson, 81, of Morongo Valley, about 15 miles north of Palm Springs, his medicine of choice is Voodoo Salve. The retired banker rubs it on his wrists and forearms to alleviate what he describes as carpal tunnel-like pain. "I'm a great supporter and believer in alternative medicines. It has alleviated the pain," he said. Palm Springs' three legal dispensaries serve about 20,000 patients, but medical marijuana advocates say more dispensaries are needed in the valley, especially since the recent crackdown on illegal storefronts. Joy Meredith, a medical marijuana patient and owner of Crystal Fantasy in downtown Palm Springs, hosts educational medical marijuana meetings monthly at her business for the public. "I really think three dispensaries leads to a ridiculous monopoly," she said. - --- MAP posted-by: Jay Bergstrom