Pubdate: Sat, 15 Aug 2015
Source: San Diego Union Tribune (CA)
Copyright: 2015 Union-Tribune Publishing Co.
Note: Seldom prints LTEs from outside it's circulation area.
Author: Steven Greenhut


SACRAMENTO - President Franklin D. Roosevelt cheered the end of 
Prohibition in 1933 with these famous words: "What America needs now is 
a drink." Roosevelt and other federal officials had been expecting the 
demise of America's widely panned policy of banning the sale, 
transportation, production and importation of booze.

As various states put an end to the prohibition of marijuana, I've heard 
of no politicians extolling Americans to enjoy a good "toke" - but many 
are nevertheless plotting the regulatory and tax strategies for a 
post-legalization world. To many California officials, the issue is not 
whether to legalize recreational uses in a state that 19 years ago 
approved medical marijuana. It's about when change will happen and what 
the world is going to look like after it does.

The best example is the recent release of the wonkish 93-page "Pathways 
Report" from the state's Blue Ribbon Commission on Marijuana Policy. The 
panel was led by Lt. Gov. Gavin Newsom, a Democrat planning a run for 
governor in 2018. Following the report, he still supports legalization, 
although he says he is less of an advocate than he was - and Newsom 
won't support just any legalization initiative. His caution sets the 
tone for the current discussion.

Usually, "blue ribbon" commissions serve up tepid analysis. But the 
report was widely applauded for its candid effort to wrestle with the 
toughest issues. The report is the state's de facto blueprint for 
constructing a legal framework in anticipation of a 2016 statewide 
ballot expected to feature at least one serious legalization measure.

"It didn't come down with any decisive conclusions on any issues," said 
Dale Gieringer, director of California NORML (National Organization for 
the Reform of Marijuana Laws), and a backer of the Reform California 
coalition that is crafting one of the better-funded initiatives. "(The 
report) is thoughtful and well-informed. We're actually quite happy with 
Blue-ribbon winners

Many conclusions are not only obvious - but designed to assuage the 
concerns of the public and law enforcement officials. The commission 
wants to ensure that children cannot easily gain access to marijuana, 
provide adequate testing of marijuana products to protect consumers, 
crack down on some of the environmental problems caused by illegal 
growing, and assure open and fair competition in the emerging weed industry.

Under the current mostly black-market situation, anyone has access to 
marijuana - and there's no outside observer who checks the products' 
potency or safety. Most environmental problems - the use of excessive 
pesticides and poisons, the waste of water resources, etc. - arise 
because these cultivation operations tend to be illegal and growers are 
more concerned about staying ahead of the law than about caring for the 
future of the property. Illegality also pushes growers onto public 
lands, which won't get confiscated if they get caught.

"Any move toward legalization is complicated by the fact that the 
federal government still lists marijuana as a Schedule 1 drug," 
according to the report. "Amid this federal prohibition, California has 
two current prongs of a marijuana industry: a) a large illicit market of 
cultivation and retail sale, and b) a quasi-legal medical cannabis 
system that is largely unregulated, untaxed and untenable."

As a result of this mishmash, the medical-pot situation invites 
recreational users to pretend they have medical conditions - and the 
"loose regulations . are also an invitation for federal intervention."

The report calls for a highly regulated recreational market with a tight 
state-licensing system; regulations to prevent the creation of a 
dominant marijuana industry; reasonable fees and taxes so a black market 
doesn't continue to thrive; limits on advertising; tracking of the 
product; government-directed testing; training requirements for 
marijuana industry personnel; a central state authority to regulate 
marijuana businesses; funding for myriad youth-protection programs; and 

Newsom emphasizes the report's call for flexibility and a phased-in 
approach: "The biggest thing I've realized through this process is that 
legalization is not a decision that is made on Election Day, November 
next year. It's a process, it's sequenced," he said. "There's an 
implementation process that's critical."

In his view, Proposition 215, the 1996 measure that legalized medical 
marijuana, has resulted in a confusing and unsettled situation because 
similar regulatory groundwork wasn't done in advance of its passage.
Regulatory overreach?

The proposed regulatory regime is so extensive it makes some marijuana 
supporters wonder whether they might not be better off under the 
existing system. "I can make the case, if you can't toke up and 
celebrate in public when it passes, it's not legalization," said Steve 
Kubby, one of the drafters of Proposition 215, current chairman of a 
cannabis-related company and Libertarian Party activist.

Kubby was subsequently prosecuted for growing marijuana on his property 
- - charges he claims were motivated by retribution for his active 
involvement in the campaign. He won his case, but his ordeal has left 
him jaded about reform efforts that give up too much in the process.

California marijuana users currently are in an overall better position 
now than those in Colorado and Washington - states that recently 
legalized recreational pot use, but did so in such a highly regulated 
and taxed way that it gave law enforcement many expanded powers, he 
argues. Legalization might "really be a step backwards."

Most marijuana activists interviewed for this article, however, are fine 
with a highly regulated approach. But they have vastly different ideas 
about what type of regulations they'd like to see - depending, of 
course, on what part of the industry they are involved in. Lobbyists for 
bigger growers want to use new rules to limit smaller mom-and-pop 
growers, whereas the small guys want limits on what they call Big 
Marijuana. There are disputes over local control.

Some marijuana activists are, for instance, supporting Assembly Bill 
266, which for the first time since Proposition 215 creates a 
state-based regulatory model for medical-marijuana clinics. The bill 
gives marijuana sellers something - the first state licensing program 
and some legal certainty. It also creates a bureau or office of cannabis 
control, which will create some necessary regulatory infrastructure when 
recreational marijuana gets the voters' OK.

But to get the backing of local law enforcement and the powerful League 
of California Cities, it "gives cities full power and authority to 
enforce rules, regulations, and standards promulgated . for facilities 
that are issued a state license." Localities get the right to ban 
medical-marijuana clinics, which is "a strange and improper approach," 
according to George Mull, president of the California Cannabis Association.

"Unfortunately, most of the cities' response is if they can say `no,' 
they will say `no,'" Mull added. So in exchange for creating a model to 
allow medical-marijuana stores, it gives cities and counties the power 
to use zoning laws to shut them down.

And that sits well with some existing marijuana clinics, he argues, for 
potentially crass reasons: "Elements of the marijuana movement are in 
areas they already are permitted and feel safe. If there are less retail 
outlets available, they get more business.. It behooves them to keep 
licenses scarce."

In 2010, California voters rejected Proposition 19, a recreational 
legalization measure. One of the key problems was it created a patchwork 
of local laws, so that marijuana might be legal in San Francisco, but 
punishable as a felony in, say, neighboring Daly City. Police agencies 
and the chiefs' association seized on that flaw, said Diane Goldstein, a 
retired Redondo Beach police officer and spokesperson for Law 
Enforcement Against Prohibition, but now champion AB 266 because "they 
want a patchwork of laws so they can support bans in cities."

The city of San Diego offers a revealing take of what happens when local 
land-use rules supersede state-based protections. City officials have 
aggressively shut down 54 dispensaries in the past year and are working 
to shutter 15 others, according to a recent Union-Tribune article.

City Attorney Jan Goldsmith says it's "about the rule of law." His 
approach is to "aggressively enforce the law against those operating 
illegally while encouraging operators to work through the process to 
obtain a legal permit."

Critics note that when permits are tightly limited, it's hard to have an 
open and competitive market - and it keeps black markets thriving. One 
of the key rationales for marijuana legalization is to free up local 
resources to focus on more serious issues. But if code enforcers, city 
attorney offices and even police are focusing on shutting down clinics 
for land-use reasons, where's the time savings?
The tax man cometh

Police, local government officials and state regulators aren't the only 
ones to grapple with a coming world of legal marijuana. Some of the 
officials on the legalization cutting edge can be found among 
California's taxing authorities. That's not a surprise, given government 
has a financial interest in garnering revenue from state businesses. And 
because of an unsettled legal situation, the state only collects a small 
percentage of the marijuana cash it is owed.

Republican George Runner and Democrat Fiona Ma of the Board of 
Equalization, the state's tax-collection agency, created a Cannabis 
Compliance Pilot Project to help medical-marijuana businesses pay their 
taxes. Currently, they are hobbled by federal financial laws that forbid 
pot companies from having bank accounts. The BOE generally forbids cash 
payments - but is coming up with exceptions to help these businesses pay 
their taxes (without even having to state what industry they are 
involved in).

Sometimes, Runner says, marijuana business owners will come into a 
tax-agency office with plastic trash bags filled with cash. This cash 
situation, he said, is an invitation to violence and corruption. Runner 
is opposed to marijuana legalization, but "I've taken a position that 
it's important for us to set up a regulatory structure before there's an 
expansion . in case voters choose to do that."

Runner and Ma recently sponsored a "Bank the Cannabis Industry" 
conference in Sacramento to address banking concerns. There's also a 
bipartisan effort in Congress to allow legitimate marijuana businesses 
to have access to federally insured banks - but its fate is uncertain. 
The BOE wants to create a California-run bank to serve licensed 
marijuana businesses.

Not everyone on the BOE wants to simply work collaboratively with 
marijuana businesses to find solutions. BOE Chairman Jerome Horton, a 
Los Angeles Democrat, is focusing more on enforcement. He recently 
announced "his support for a `Cannabis Tax Enforcement Eliot Ness Plan,' 
which is intended to educate, investigate, audit, arrest, and force 
cannabis sellers to pay their fair share of taxes."

He is backing an amnesty bill that offers growers a chance to come out 
from under the shadows "or risk imprisonment, as gangster Al Capone did 
for tax evasion."

In an interview, Horton agreed a majority of those in the 
medical-marijuana business are honest citizens. "We have to encourage 
those who are legitimate operators to comply, to fill out the permits 
and so forth and report and pay your taxes so we can distinguish between 
the ones who are not legitimate." But he said he is providing a stick 
along with the carrot.
Slow road from Prop. 215

State officials are still struggling with a framework for the 
normalization of medical-marijuana clinics 19 years after they became 
legal - and just as voters are moving on to wider legalization. One 
thing governments tend to be good at is collecting taxes. But 
California's government still hasn't sorted this out, even though 
grappling with the existing medical-marijuana structure is crucial to 
building any new recreational system.

Indeed, one of the complicating matters for the 2016 ballot is AB 266's 
fate. If it passes, initiative writers will need to see how these new 
rules for medical dispensaries might affect their ballot language.

One of the biggest questions raised by the Pathways report: Does the 
state follow Washington's model or Colorado's? Washington left its 
medical-marijuana business intact (although officials are clamping down 
on it) and then held a lottery system for new recreational businesses. 
But the high tax rate on the recreational stores created a continuing 
incentive for people to game the system and buy weed at dispensaries. 
High taxes also bolster the black market.

"The Colorado model makes sense for California," said Max Del Real, 
executive director of the California Cannabis Business League, a trade 
association that represents growers, distributors, laboratories and 
investors. "They took all the medical-marijuana businesses and 
essentially transitioned them into recreational commercial businesses."

Del Real says marijuana is a big business today that employs tens of 
thousands of people and works with local governments. He'd like to see 
backyard growers replaced by big growers who get cultivation licenses 
for commercial settings in urban environments - e.g., in 
50,000-square-foot warehouses in industrial parks. He also backs strict 
numerical limits on pot shops and licenses, such as those in San Diego.

It's easy to see, however, why smaller operations are concerned about 
this approach. This is where the commission's report might have a blind 
spot. It wants to ensure "the industry and regulatory system are not 
dominated by large, corporate interests." But in advocating a tightly 
regulated market with lots of government controls and limits, the 
corporate entities that can afford lobbyists and lawyers are the ones 
most likely to get the approvals.
Driving into a roadblock

One of the thorniest roadblocks to legalization is the issue of drugged 
driving. Assemblyman Tom Lackey, a freshman Republican from Palmdale and 
former California Highway Patrol officer, authored a bill to allow cops 
to use an oral-fluids test (such as a mouth swab) designed to detect 
impaired driving. "We're sharing the roadway - including with those who 
are treating themselves medicinally," he said.

Lackey and the report agree on the need to combat drugged driving 
without arresting people who may have smoked earlier in the day, week or 
month. Unlike alcohol and chemical-based drugs, marijuana stays in one's 
system long after it causes impairment. The bill failed in committee 
mainly over concerns about false positives.

NORML's Gieringer says it's foolish to apply an alcohol-oriented testing 
system to this totally different substance. Driving safety has done 
nothing but improve since the passage of Proposition 215, he argues. 
People are smoking marijuana and driving now anyway. He doesn't believe 
legalizing marijuana would have any noticeable effect on drugged driving.

Even Lackey, a legalization foe, has backed AB 266 and was involved in 
the cannabis banking seminar, indicating the degree to which the debate 
in California has shifted from "if" to "when."

By contrast, marijuana legalization is still a topic for posturing or 
careful evasions among presidential candidates.

"If you're getting high in Colorado today, enjoy it. As of January 2017, 
I will enforce the federal laws," warned Republican presidential 
candidate and New Jersey Gov. Chris Christie.

Here in California, such rhetoric is rare. Instead, foes are quiet and 
legalization advocates are sorting through at least six different 
measures in the hopes of backing one that will pass statewide muster. 
There's a good chance California will soon join the legalized ranks of 
Alaska, Colorado, Oregon, Washington and the District of Columbia.

Fortunately, officials here aren't waiting for a vote before creating a 
legal and regulatory framework.
Views on pot policy

Here are some views from prominent state officials regarding current 
medical-marijuana policy and what it might mean if the state legalizes 
recreational marijuana in 2016.

Lt. Gov. Gavin Newsom, chairman of state's Blue Ribbon Commission on 
Marijuana Policy

"The process has certainly made me more cognizant of the intended and 
unintended consequences in a state that is very different than Colorado, 
Washington, Oregon or Alaska - a state where the magnitude of this 
decision . will be felt not only throughout the country, but notably in 
Mexico and elsewhere. . I was a stronger advocate candidly in the 
beginning than I am today, though an advocate I am today nonetheless."

"As a taxpayer, I'm sick and tired of paying for the prosecution costs, 
the public defender, the defense costs, the court time. I was a mayor 
that was part of the problem getting federal grants . where we were 
doing undercover buy and busts - massive overtime, massive federal waste 
of money and then keep our police writing reports on marijuana, not 
being out on the streets dealing with serious and violent criminals. . 
We used to solve murders overwhelmingly in this country up until the 
1970s. It's interesting if you look at the stats. We used to close out 
cases because we had more police work more time focused on that."

San Diego City Attorney Jan Goldsmith

"(Our strategy is to) aggressively enforce the law against those 
operating illegally while encouraging operators to work through the 
process to obtain a legal permit. It's about the rule of law."

David Thomas, Federal Reserve Bank in San Francisco, during the Bank the 
Cannabis Industry symposium in Sacramento

"The legal, recreational and medicinal marijuana industry has been 
reported to be the fastest growing industry in the U.S., with revenues 
estimated to be $2.7 billion. . Only 105 financial institutions are 
engaged in banking relationships with marijuana-related businesses.
- ---
MAP posted-by: Matt