MEDICAL CANNABIS A BLOSSOMING BUSINESS, FOR MARTINEZ?

On Monday, the Public Safety Subcommittee finished reviewing and
tweaking a new draft ordinance laying out operating rules for a
Martinez medical cannabis dispensary; the draft is now under
consideration by the city manager, city attorney and police chief.

After the discovery of gold in the American River was widely
publicized in 1848, an estimated 300,000 prospectors flooded into the
state over the following six years. The lure of easy money made
simply by harvesting and hawking Mother Earth's bounty was an
intoxicating enticement that eclipsed most physical obstacles.

Roughly 150 years later, a natural commodity once again engendered a
'wild west' atmosphere, attracting entrepreneurs of all stripes
jockeying to establish hegemony. This time the craze is over flowers,
cannabis flowers. The aroma of tens of millions of dollars in annual
profits is heady.

Between 1996, when California voters passed the Compassionate Use Act
legalizing the sale of cannabis for medical purposes, and 2003, when
the Legislature passed SB420 in an effort to clean up the nascent
industry's figurative frontier, hundreds of medical cannabis
dispensaries opened across the state. Some were backed by significant
start-up capital but most by "well meaning activists with not a lot
of [funding] or business experience," said Steve DeAngelo, owner of
Harborside Health Center in Oakland.

"SB420 codified the fact that non-profit associations of patients
would be allowed to cultivate and distribute cannabis, but it really
set the stage for local jurisdictions to begin licensing and
regulating sales," DeAngelo explained on Wednesday.

Despite SB420's goal to bring order to the industry, it was after
enactment that there was an explosion of dispensary openings in Los
Angeles and elsewhere. The legislation engendered a second wave of
operators, coming from shadowland careers in pornography and
gambling, said DeAngelo, who were mainly interested in making as much
money as quickly as possible.

Soon 14 different dispensaries had opened up in a cluster in downtown
Oakland. There were barkers on the sidewalk steering customers in,
people shoving coupons in the hands of passerby, cars were double
parking and many were opening smoking cannabis in public.

But as soon as local jurisdictions began heeding SB420's mandate to
"promote uniform and consistent application of the [Compassionate Use
Act] among the counties within the state," the tide turned on outlaw operators.

"It was the local regulations that was responsible for cleaning up
the Wild West atmosphere," said DeAngelo.

In 2004, the Oakland City Council enacted the nation's initial local
jurisdictional regulation, and authorized licenses to just four
dispensaries. They also required geographical dispersion. In the
first year, two of the four were unable to meet the permit
requirements and lost their licenses.

In 2005, the Council revamped the permitting, making the process even
more stringent, and reissued the available two licenses, one of which
was granted to Harborside.

"Since then, the City has not received one single complaint [against
the four dispensaries]. In fact, it conducted a survey of crime stats
in those neighborhoods and found the level of crime had dropped in
every case," DeAngelo said. "[The Oakland dispensaries] don't want to
lose their licenses, so we are very careful. The key to [safe
operating] is effective regulation at the local level."

In Martinez, the Council's Public Safety Subcommittee continues to
refine a replacement ordinance that will, if approved by the entire
Council, soon enable the issuance of one operating license the first
year, and up to three thereafter.

Not unlike gold, dispensaries have become a million dollar industry,
but those vying for their position in the Martinez market all claim
altruistic motivations ranging from concern for patients to the
potential profits to city coffers.

Of the several distinct entities hoping to be selected by the City to
establish a Martinez dispensary, none--until now--are based here.
Larry Flick of GreenLeaf Collective lives in Woodacre, CA. Robert
Martin, Ph. D. of Collective Wellness is simultaneously seeking to
open a Berkeley dispensary. Martin told the Gazette earlier in the
year that his motivation for establishing a Martinez dispensary lies
in his determination to bring legitimacy and quality assurance to a
fledgling growth industry. An under-served market also factored into
the equation when he and his partner, John Oram, Ph. D., were
discussing possible dispensary locations in 2009, as did the City's
management direction, said Martin.

Flick, CEO of the Bay Area retail chain The Floor Store, reiterated
to the Gazette last week that his vision "is to provide a holistic
medicinal center in an upscale setting ... to offer a warm, natural
setting that anyone's mother or grandmother feels safe and secure in
to receive medicinal cannabis products. Martinez provides an idyllic
location in regards that it is a centrally located to areas such as
Lafayette, Walnut Creek, Danville, Alamo and Moraga."

"There has been a great need to be able to offer services to these
residents who are unable to travel to San Francisco, Oakland or
having some unknown person deliver to their personal residence, or
most importantly don't want to visit a collective that is operating
illegally," Flick said. " I know there are many other competitors out
there who have long, litigious histories of operating illegally and
not working in unison, nor respect to city regulations, residents and
officials ... We would be honored to provide Martinez with an upscale
wellness center that would be a model of integrity and safety for the
city and also a substantial source of tax revenue."

In the past two weeks, a new potential operator has indicated his
interest in founding a Martinez dispensary; one who was born, raised
and lives here.

While the Gazette agreed not to presently identify this individual,
upon his request, his family is well known to many and is one of the
top property owners in the immediate area. We'll refer to him under
the pseudonym Homegrown.

During a late afternoon interview in his downtown office, Homegrown
started the conversation by making it clear that he never considered
a foray into the medical cannabis industry until recent months, when
he began paying attention to the profits being reported by the
Oakland dispensaries.

According to DeAngelo, combined the four Oakland dispensaries earned
$28 million last year. Due to passage of Measure F in July of 2009,
which Oakland voters approved by a landslide, a special 1.8 percent
business tax is imposed on dispensary sales, bringing in just over
half a million to the city's coffers.

"We would be crazy to let this opportunity pass us by," said
Homegrown. But the difference between him and other prospective
operators is crucial, he said, because he would reinvest a major part
of net profits back into the City of Martinez. Homegrown envisions
being able to serve as a one-man redevelopment agency, capitalizing
on the exploding medical cannabis industry for the good of Martinez.