OAKLAND FINDS PEACE WITH ITS POT CLUBS

It is a warm weekday afternoon in uptown Oakland, and all's quiet on
17th Street, save for the steady revolution of customers in and out
of the Coffeeshop Blue Sky.

"Just imagine," said Richard Lee, nodding at the familiar scene, "if
you had four liquor outlets in all of Oakland. It's ridiculous."

Blue Sky is one of four medical marijuana dispensaries in the city.
Lee is owner of the coffee shop and president of the 2-year-old
Oaksterdam University, two blocks away, where 3,000 students have
gone through courses on everything from hydroponics to staying within
the boundaries of the ever-shifting law on medical marijuana.

Marijuana customers are ushered into the Blue Sky's back room, past
the racks of tiny plants for sale ($12 each), only after showing
their medical-marijuana card to a security guard, who records the
number. Customers choose from a menu of marijuana, which sells for
$30 for an eighth-ounce of medium grade, $40 for high grade.

Lee brings out a platter of marijuana-laced goodies for sale:
cookies, fudges, Italian dressing, peanut brittle, olive oil, tea,
jelly, pesto, lollipops, lemon bars.

"I have a stockpile at the house," a man in his 20s said of the lemon
bars. "Awesome. They're awesome."

He gets his order of marijuana to go in a brown paper bag. "Hey,
thanks for making us all happy, man," he tells Lee.

Oakland's medical marijuana outlets have engendered acceptance in a
city that once was in the front lines of the war between state and
federal drug laws. In 2001, the U.S. Supreme Court upheld the
shutdown of an Oakland dispensary, finding no exemptions in federal
drug law for medical necessity.

Oakland is now in the vanguard of medical marijuana, only this time
as a model of tranquility. On Tuesday, the balloting will close on
Measure F, which would make Oakland the nation's first city to have a
business-tax category for cannabis operations.

Until now, the dispensaries have been paying a baseline rate of $1.20
per $1,000 of gross receipts. Passage of Measure F would create the
separate category for cannabis business, at a rate of $18 per $1,000
of sales. The dispensaries already assess sales tax on purchases.

Oaksterdam's Lee, whose for-profit dispensaries sell about $3 million
worth of marijuana a year, could see his annual tax burden rise by
$50,000. Yet he supports Measure F, as does just about the entire
Oakland establishment, including police and community groups.

Lee knows that an industry that produces revenue for government tends
to be looked upon more favorably in the halls of government.

"We see this," he said, "as a step toward legitimizing the industry."

Waves of Anxiety

Nearly 13 years after the passage of Proposition 215, which approved
the medical use of marijuana in California, the application of the
law remains a work in progress. President Bill Clinton's
administration responded to Prop. 215 by filing civil suits against
pot clubs the sprouted across the state; President George W. Bush's
administration raided and prosecuted medical marijuana suppliers.

Candidate Barack Obama said states should be allowed to make their
own rules on medical marijuana. His attorney general, Eric Holder,
signaled in February that the president would keep his campaign
promise, and the raids on California pot dispensaries would end.

Then, in May, the U.S. Supreme Court declined to take up a lawsuit by
San Diego and San Bernardino counties, which sought a definitive
ruling on whether federal drug laws trumped the state's medical marijuana law.

But the truce with Washington has brought anything but a sense of
relief to cities and counties that suddenly faced the prospect of new
and expanded dispensaries in their communities. In the past two
months alone, moratoriums on new dispensaries were passed or extended
from beach towns (Santa Cruz, Oceanside) to the foothills (Nevada
City) to the valleys (Sacramento, Hemet) and to the suburbs (Orinda,
Escondido). Conservative or liberal, politicians in those towns share
a common anxiety: a wave of new or expanded dispensaries they do not
have the means to control. Reefer madness: The L.A. story

"What is happening in Los Angeles is an absolute freaking disaster."

Those are not the words of an anti-marijuana crusader. That is the
observation of Bruce Mirken of the Marijuana Policy Project.

"As much as we think marijuana should be legal and regulated, you do
have to have a reasonable set of rules," Mirken said. "Folks can
argue about the fine details, but nobody - at least nobody sane -
thinks marijuana is like Coca-Cola. It needs sensible controls."

Four years ago, Los Angeles had just four storefront dispensaries. As
dispensaries began to proliferate, the city in 2007 passed a
moratorium on new ones - but, in a colossal misjudgment, created a
hardship exemption. Hundreds of medical-marijuana entrepreneurs
exploited the loophole.

The city has moved to tighten its rules, but not before Los Angeles
found itself with an estimated 600 to 800 dispensaries.

"I think that the policy of the federal government is unfortunate. ..
I think the policy of this state is Looney Tunes," Los Angeles Police
Chief William Bratton said after Holder's suggestion that the raids
would end. "They pass a law, then they have no regulations as to how
to enforce the darn thing and, as a result, we have hundreds of these
locations selling drugs to every Tom, Dick and Harry." Medicine? Sometimes

It would require a willful suspension of disbelief to think that all
the marijuana being sold at California's dispensaries is being used
for medicinal purposes. Proposition 215 was advertised as a way to
provide compassionate relief to people suffering from AIDS, cancer,
glaucoma and other serious conditions for which it has shown to be
effective. But there are no limitations on ailments for which
physicians can recommend marijuana - and a cottage industry has
emerged of doctors who openly advertise on referrals for everything
from chronic pain to PMS.

Lee was asked if he knew of any would-be customer who could not get a
medical referral. "Um," he hesitated, "pretty much no. All you need
is $150" for the required medical examination.

Rebecca Kaplan, the Oakland city councilwoman who helped write
Measure F, said she had no illusions about the composition of the
customer base at the dispensaries.

"It's an interesting question. ... I don't want to say it's perfect,"
Kaplan said. "Is medical cannabis any less medical than medical
Viagra?" Oakland's reality check

Kaplan also knows that Oaksterdam University and the dispensaries
have proved to be good neighbors in a part of town that needs people
and businesses. They sweep the sidewalks, they donate to local
causes, they join civic groups. Unlike Berkeley and San Francisco,
Oakland does not allow pot smoking at its dispensaries.

"Nothing crazy at all," said Kiana McGill, a clerk at A Diva's
Closet, a fashion store next to the Blue Sky. "There's not a lot of
noise or anything like that ... they have good people, good security."

They also have a mission beyond the bottom line, which is why
RichardLee is so willing to accept a fifteenfold increase in his business tax.

Lee, 46, has been determined to advance the legalization of marijuana
ever since he waited 45 minutes for Houston police to respond after
he was carjacked at gunpoint in 1991.

"The problem was that police were spending more time looking for
people like me and my friends than going after the sociopaths and
predators," he said.

In Oakland, the issue of marijuana as a police priority was pretty
much settled with the 2004's Measure Z, which made it law
enforcement's lowest concern.

"The nice thing about our police is they don't have their head in the
clouds," Kaplan said. "The police in Oakland know what real crime is
- - and this is not that." Conflicts and contradictions

Even as Oakland pushes the boundaries of regulation and taxation, the
gaps and contradictions in pot laws remain profound. In many areas of
the state, medical-marijuana patients have to drive many miles to
find a dispensary. If they come to Oakland's Blue Sky, they are
allowed a 4-ounce limit per purchase, instead of the 1-ounce limit for locals.

Across the bay, San Francisco started tightening its controls on
dispensaries four years ago, requiring a $7,000 permit and annual
reviews. The number of pot clubs dropped from 40 to two dozen - and
complaints from neighboring businesses and residents have fallen.

"Since we were working with no instruction at the state level, and
always looking over our shoulders at the feds, we had to work with
the tools we had," said San Francisco Supervisor Ross Mirkarimi. The
legalization question

Gov. Arnold Schwarzenegger recently said, "I think it's time for
debate" on the legalization of marijuana. An April Field Poll showed
that 56 percent of Californians favored legalization. The state Board
of Equalization added fuel to the debate last week when it calculated
that legislation by Assemblyman Tom Ammiano, D-San Francisco, to
legalize marijuana and tax it at $50 an ounce would generate $1.4
billion a year in taxes.

Ammiano's bill is stalled for the year, though he said the issue
"feels like it has more traction than it ever has," especially as
budget woes heighten quests for revenue and concerns about the costs
of enforcing ineffective drug laws.

And even though a legalization initiative is being drafted for 2010 -
one that would give wide latitude to cities and counties to regulate
cultivation and sales - there is disagreement among advocates about
whether the issue's moment has arrived.

"It might be a little early," conceded Oaksterdam's Lee.

For now, advocates of legalization will have to settle for an
incremental step: a new business-tax category in Oakland that could
bring the city several hundred thousand dollars a year.

"I don't think it's a turning point ... but it starts the ball
rolling," said Oakland City Attorney John Russo, who as a City
Council member helped tighten regulation of the dispensaries. "As
cities start taxing pot and making money, other government entities
are going to start asking: 'Why aren't we getting in on this revenue stream?' "