SACRAMENTO BALLOT MEASURE WOULD ALLOW POT TAX IF LEGALIZATION PUSH SUCCEEDS

Should California voters approve a November ballot measure to legalize
recreational marijuana use, the city of Sacramento is prepared to tax
it.

The City Council decided late Tuesday to place a companion measure on
the ballot for a 5 percent to 10 percent local tax on potential retail
sales of marijuana. The city also is asking voters to decide whether
to impose a 2 percent to 4 percent tax on gross receipts at existing
medical marijuana dispensaries.

Council member Sandy Sheedy, who sponsored the tax measure, said the
city isn't deciding to open the door on a retail pot trade for
recreational users. But after getting caught unprepared by an influx
of more than three dozen medical marijuana facilities, council members
voted unanimously to place the local tax proposal on the ballot.

"We're doing this to get ahead of the process," Sheedy said. "That
doesn't mean that now we have a tax and it's OK for everyone to come
in" and open retail pot outlets.

Other California cities also are considering how to position
themselves in case Californians legalize marijuana beyond current
medical use.

Long Beach is considering a 10 percent tax on pot businesses that
might open if voters pass Proposition 19. In Rancho Cordova, a
Sacramento County suburb that has banned medical marijuana
dispensaries, the city is exploring both a retail tax and a tax on
people who decide to grow pot in their homes.

"It is such a complicated issue. We want to protect our residents,"
said Rancho Cordova spokeswoman Nancy Pearl.

She said the City Council on Aug. 2 will discuss a potential fee on
recreational users who grow pot to cover city costs for public
nuisance complaints or oversight "that will require more vigilance on
our part."

Proposition 19 would legalize recreational marijuana use for
California adults 21 and over, permit small residential cultivation
and allow local governments to tax and regulate pot sales.

The cities preparing for the initiative's potential passage aren't
endorsing it. But Dan Newman, a campaign strategist for the Yes-on-19
campaign, Tax Cannabis 2010, applauded Sacramento's decision to place
a companion measure on the ballot.

"The City Council's action shows that passing Proposition 19 to
control and tax marijuana like alcohol will help fund vital services
and ... help them balance budgets," he said.

Roger Salazar, spokesman for Public Safety First, the No-on-19
campaign, said the efforts under way should serve as warning signs of
the potential harm posed by the pot legalization measure.

"There can be a race to the bottom for taxes to try to lure these
(recreational marijuana) businesses to their localities," Salazar
said. "The unfortunate thing is that all this potential revenue is
contingent on the notion that more people will use this drug."

Should it win voter approval for the local measure, the City of
Sacramento is anticipating $300,000 to $500,000 in annual tax revenues
from 39 currently registered medical pot dispensaries.

The measure would impose a 2 percent tax on gross receipts at medical
pot shops and allow the City Council to increase it to 4 percent. It
would set a 5 percent tax rate on potential retail sales of
recreational marijuana and permit the council to raise it to 10 percent.

The proposal didn't go over well with medical dispensary operators,
who are already subject to state sales taxes on marijuana
transactions.

Lanette Davies, operator of the Canna Care dispensary, said the tax
undermines pot shops' ability to provide low-cost products to
low-income and disabled medical marijuana users.

A marijuana patient, Sue Malone, scolded the council for seeking a
discriminatory tax that targets only cannabis businesses. "To even
think about that is absolutely sinful," she said.

Last year, Oakland became California's first city to tax marijuana
when voters approved a 1.8 percent tax on local dispensaries. Now that
city is considering allowing four commercial medical marijuana-growing
operations in hopes of generating millions of dollars in new revenues
in taxes and licensing fees.

San Jose and Berkeley also are contemplating November ballot
initiatives to tax medical marijuana or pot cultivation.

One speaker at Sacramento City Hall wasn't at all happy about cities
looking to marijuana as a revenue source. Andre Gayet told council
members the taxes sanction narcotics abuse.

"Your eyes have this glazed look with dollar bill signs like you're
going to see all these dollars from marijuana," he said. "Let me warn
you: Marijuana is just the tip of the iceberg."