MEDICAL MARIJUANA TOUTED AS CURE FOR CITIES' BUDGET WOES

Oakland attracted national attention last week with the country's
first voter-approved medical marijuana business tax -- a 15-fold
increase that won easy victory in a special election Tuesday.

Some supporters -- including some operators of the dispensaries that
will be taxed -- see the measure as a step toward legalizing
marijuana. Cities with dispensaries are eyeing the move as a way to
fill empty municipal coffers in the wake of crushing local and state
budget deficits, and to standardize their approach to medical
marijuana outlets.

Other California cities, including Berkeley, San Francisco, Santa
Cruz and Los Angeles, have all discussed a tax on medical marijuana
or have plans to pursue a tax.

"It's just smart economics," said San Francisco Supervisor Ross
Mirkarimi. His District 5 includes four of the city's 16 licensed
outlets; estimates of overall outlets number as many as 40. "It is a
progressive tax on a widespread practice and a readily accessible product."

California dispensaries generally pay license and registration fees,
as well as payroll and state sales tax.

The Oakland pot club levy raises an additional $16.80, for a total of
$18, for every $1,000 of medical marijuana sold by taxing overall
gross receipts. It could begin generating an additional $294,000 a
year for the city when it takes effect Jan. 1.

To impose a similar tax, San Francisco would have to create a gross
receipts tax for pot clubs -- a plan that Mirkarimi said he sees
coming before supervisors this year.

The board shelved a similar plan 3UKP1/2 years ago, he said. But it
was encouraged to dust off the legislation because the Obama
administration announced that federal agencies would not continue
raids in states where the use of medical marijuana has been
legalized. Such raids were actively pursued during the presidency of
George W. Bush.

The new stance opened up the idea of a tax for other cities, as well.
Los Angeles City Council members brought forth a motion July 15 to
explore a tax on legal medical marijuana sales.

"A tax on medical marijuana could enable the city to continue
providing services we might otherwise have to cut," Councilwoman
Janice Hahn told reporters.

But hurdles remain before the measure can advance, including the need
for a permanent ordinance regulating dispensaries, expected to be
finalized in October, officials said.

An estimated 600 to 800 dispensaries operate in Los Angeles in
addition to the 186 that were registered before a 2007 moratorium.

Berkeley council members also have discussed a motion similar to
Oakland's. But the idea "just hadn't crystallized," said
Councilmember Kriss Worthington, whose District 7 includes a
dispensary on Telegraph Avenue.

Likewise, Santa Cruz lawmakers have been receptive to a tax on
dispensaries but have no formal plans, Councilmember Mike Rotkin said.

He called the tax a "no-brainer" even though the Santa Cruz City
Council is on the verge of approving a temporary freeze on marijuana
clubs in the city.

Two clubs are now licensed to operate in Santa Cruz. A few more might
be acceptable in the future, but Santa Cruz doesn't want to become
the pot center for the area, Rotkin said.

But having so few clubs would minimize the revenue a tax could
generate, he said.

"The tax is just an additional benefit," Rotkin said. It shows
support for medical marijuana, he said.

"And anything that brings back more money to the city will be
attractive," he said, "even if it's a small amount."

On the state level, Assemblyman Tom Ammiano, D-San Francisco,
introduced a bill this year to legalize and tax marijuana. The bill
could generate nearly $1.4 billion in revenue for the cash-strapped
state, according to an analysis by California tax officials.

In addition, a group of California criminal defense attorneys
submitted a pot legalization measure to the state Attorney General's
Office. The "Tax, Regulate and Control Cannabis Act" needs 443,000
signatures to be included on the November 2010 ballot. The bill is
backed by Oakland dispensary operator Richard Lee.

The legislation would not completely resolve the federal-state
stalemate over marijuana, which the nation's drug czar, Gil
Kerlikowske, said the federal government will not support legalizing.
Kerlikowske, director of the White House's Office of National Drug
Control Policy, made the comments Wednesday in Fresno, where agents
seized $1.26 billion worth of pot plants and arrested 82 people in 10
days, according to the Fresno Bee newspaper.

Nationwide, police arrested a record 872,721 people for marijuana
violations in 2007, according to the FBI's annual Uniform Crime Report.

Worthington applauded Oakland for being the first city to pass the
medical marijuana dispensary sales tax. The motion to tax Berkeley's
three dispensaries would have to wait until the 2010 election because
running a special vote for one measure is too expensive, Worthington said.

He predicted widespread acceptance for a similar measure among
Berkeley voters judging by their support for past legislation that
eased marijuana laws and the perception that the "war against drugs
is a waste of time."