CALIFORNIA FINDS POT IS A HUGE CASH COW

Since California Became the First to Legalize Marijuana for Medicinal
Use, the Weed the Federal Government Puts in the Same Category As
Heroin and Cocaine Has Become a Major Economic Force.

SAN FRANCISCO (AP) -- A drug deal plays out, California-style:

A conservatively dressed courier drives a company-leased Smart Car to
an apartment on a weekday afternoon. Erick Alvaro hands over a white
paper bag to his 58-year-old customer, who inspects the bag to ensure
that everything he ordered over the phone is there.

An eighth-ounce of organic marijuana buds for treating his seasonal
allergies? Check. An eighth of a different strain for insomnia?
Check. THC-infused lozenges and tea bags? Check and check, with a
free herb-laced cookie thrown in as a thank-you gift.

It's a $102 credit-card transaction carried out with the practiced
efficiency of a home-delivered pizza -- and with just about as much
legal scrutiny.

More and more, having premium pot delivered to your door in
California is not a crime. It is a legitimate business.

Since the state became the first to legalize the drug for medicinal
use, the weed the federal government puts in the same category as
heroin and cocaine has become a major economic force.

Based on the quantity of marijuana that authorities seized last year,
the crop alone was worth an estimated $17 billion or more, dwarfing
any other sector of the state's agricultural economy.

And pot also props up local economies, mints millionaires and feeds a
thriving industry of startups -- stores that sell high-tech
marijuana-growing equipment, pot clubs that pay rent and hire
workers, chains of for-profit clinics that specialize in
medical-marijuana recommendations.

The plant's prominence does not come without costs, some critics say.

Marijuana plantations in remote forests cause severe environmental
damage. Authorities link the drug to violent crime in otherwise quiet
small towns.

Still, some lawmakers are pushing for broader legalization as a way
to shore up the finances of a state that has teetered on the edge of
bankruptcy. The state's top tax collector estimates that taxing
marijuana like liquor could bring in more than $1.3 billion annually.

On Tuesday, Oakland will consider a measure to tax the city's four
marijuana dispensaries, which the city auditor projects will ring up
$17.5 million in sales in 2010. The city faces an $83 million budget
shortfall, and it expects the marijuana tax to raise $315,000.

With a recent poll showing more than half of Californians supporting
legalization, pot advocates believe they will prevail.

And they say other states will follow.

Tim Blake is the proprietor of a 145-acre spiritual-retreat center
that holds an annual marijuana bud-growing contest in the heart of
Northern California's pot-growing country.

Politicians, he says, are "going to see the economic benefits,
they're going to see the health benefits and they're going to jump on
the bandwagon."

Where It's Grown

On a property flanked by vineyards, Mendocino County farmer Jim Hill
grows marijuana for up to 20 patients, including himself and his wife.

Hill's plants enjoy careful nurturing in a temperature-controlled
greenhouse. On a recent spring day, his college-age son spread bat
guano to fertilize two dozen 6-foot-tall plants.

Hill, 45, says he spent $10,000 to set up the garden. Patients
receive their drugs free in exchange for helping with his crop.

"It's kind of like living on an apple orchard," Hill said. "You don't
pay for an apple."

Although marijuana is cultivated throughout California, the most
prized crops come from the forested mountains and hidden valleys of
Mendocino, Humboldt and Trinity counties -- the Emerald Triangle.

The economic impact is difficult to gauge. Authorities say the
largest grows are run by Mexican drug cartels that simply funnel
money from forest-raised crops into their bank accounts.

Still, marijuana money from outdoor and indoor plots inevitably flows
into local coffers. Marijuana increases residents' retail buying
power by about $58 million countywide, according to a Mendocino County report.

Business Boost

In Ukiah, the county's largest city at 11,000 residents, business
owners say the extra cash is crucial. "I really don't think we would
exist without it," said Nicole Martensen, 37, whose wine and garden
shop is stocked with bottles from county vintners.

Mendocino County Sheriff Tom Allman says medical-marijuana operations
that follow state and county laws will face no hassles from his
department. His deputies left intact 154 marijuana grows they visited
last year, he said.

"If you're living in the boundaries," Allman said, "I'm not going to
mess with you."

Which is not to say there is no legal risk to growing, selling or
buying marijuana. Federal laws still apply, and pot dealings not
deemed medicinal are considered criminal by the state, where police
made about 74,000 pot-related arrests in 2007.

Even people accustomed to buying marijuana over the counter are
impressed when they visit the Farmacy, a dispensary-cum-New-Age
apothecary with three locations in Los Angeles. Decorated in soft
beige and staffed by workers in lab coats, the Venice store sells
organic toiletries, essential oils and incense along with 25 types of
marijuana stored in glass jars.

During a two-hour span, the dozen or so customers who made a purchase
all bought pot products and paid the 9.25 percent state sales tax on
top of their purchases. The clubs, which are not supposed to turn a
profit, call their transactions "donations."

"Green Rush"

Allen Siegel is 74; he is dying of cancer and wants to try smoking
marijuana to ease his pain without knocking him out like prescription
drugs do. So his wife, Ina, brought him to the Farmacy for his first
visit as a legal pot patient.

"You go in there, and they have so many choices," she said.

California's "green rush" was spurred by a voter-approved law 13
years ago that authorized patients with a doctor's recommendation to
possess and cultivate marijuana for personal use.

Although a dozen other states, including Washington, have adopted
similar laws, California is the only one where privately owned pot
shops have flourished. Los Angeles County alone has at least 400
dispensaries and delivery services, nearly twice as many outlets as
Amsterdam, the Netherlands capital whose coffee shops have been
synonymous with free-market marijuana for decades.

California's pot dispensaries now have more in common with a corner
grocery than a speak-easy. They advertise freely, offering discount
coupons and daily specials.

Justin Hartfield, a 25-year-old Web designer and business student,
founded WeedMaps.com, where pot clubs and doctors who write
"medi-pot" recommendations list their services and users post
reviews. Hartfield says the year-old site brought in $20,000 this
month, an amount he expects to double in August.

Like virtually everyone else connected to the cannabis trade,
Hartfield has a letter from a doctor that entitles him to buy medical
marijuana. But he sees no point in pretending he is treating anything
more than his taste for smoking weed.

"It is a joke," he said. "It's a legal way for me to get what I used
to get on the street."

The Future of Cannabis

What would happen if marijuana was legal -- not just for medical
uses, but for all uses?

Assemblyman Tom Ammiano, D-San Francisco, wants the state to tax and
regulate all pot as it does alcohol. State Board of Equalization
Chairwoman Betty Yee, a supporter, projects the law would generate
$990 million annually through a $50-per-ounce fee for retailers and
$392 million in sales taxes. (The state now collects $18 million each
year in taxes on medical marijuana.)

Meredith Lintott, Mendocino County's district attorney, argues that
big-time growers never would bother filing tax returns. "Legalizing
it isn't going to touch the big money," she said.

But others predict the black-market business model would fall apart.

Large-scale agri-businesses in California's Central Valley would
dominate legal marijuana production as they already do bulk wine
grapes, advocates argue. Pot prices would fall dramatically, forcing
growers to abandon costly clandestine operations that authorities say
trash the land and steal scarce water.

And legalization, supporters insist, would save state and local
governments billions on police, court and prison costs.

But others survey California in 2009 and say the cannabis future is
now. Richard Lee has parlayed two Oakland dispensaries into a
mini-empire that includes a marijuana-lifestyle magazine, a
starter-plant nursery and a three-campus marijuana trade school.
Oaksterdam University's main campus is a prominent fixture in
revitalized downtown Oakland.

All without legalization.