LOCAL POT GROWERS FEAR BEING EDGED OUT OF MARKET WITH PROP 19

BOULDER CREEK -- It's no surprise that Santa Cruz County is home to a
multimillion-dollar marijuana trade. From pot farms high in the Santa
Cruz Mountains to dispensaries in many towns, the flourishing but
subtle marijuana economy is the livelihood of hundreds, if not
thousands, making it at least as viable as the region's pre-eminent
strawberry business.

Tuesday, California voters will decide whether to legalize marijuana,
not just for the sick but for recreational users, ushering in a whole
new audience for the long-established industry. In spite of the
anticipated spike in demand, however, the prospect of legalization has
put many local growers and retailers, comfortable with the current
ambiguities of the marketplace, on edge about what might come.

"The government has been totally against marijuana. Now they want to
take the money in it and run?" remarked Mary DiPiero, who started
growing marijuana at her home off Big Basin Way when her construction
business struggled five years ago. "What is going to happen to the
growers if this passes? Are we going to be taxed, too?"

DiPiero, who uses medical marijuana, also sells to cooperatives in
Monterey, the East Bay and Boulder Creek.

Proposition 19, officially dubbed The Regulate, Control and Tax
Cannabis Act of 2010, legalizes the cultivation, distribution and sale
of marijuana. But it calls on state and local governments to develop
the terms under which commercial interests can operate.

That leaves many unanswered questions for Santa Cruz County's mostly
small-scale operations, many of which are still trying to navigate the
patchwork of regulation that followed legalization of medical
marijuana in California 14 years ago. In some communities medical
marijuana use is tolerated while in others it's prosecuted.

Several growers who spoke with the Sentinel about Proposition 19 said
they fear prohibitive licensing requirements and burdensome taxes that
could come with the measure. Additionally, many worry about the
reaction of the federal government, which considers all marijuana use
illegal. The Obama administration has pledged not to crack down on
medical pot but says it can't ignore recreational consumption.

"Proposition 19 just exacerbates the confusion," said Amir Daliri,
director of government relations for the California Cannabis
Association, a group that represents dozens of growers and dispensary
owners. "Dispensaries are still getting raided. Growers are still
being busted. Cops and public officials have no clear direction ... If
we haven't gotten medical marijuana right, how can we just jump into
recreational use?"

Of course, not everyone growing or selling marijuana opposes
legalization.

With estimates suggesting demand for marijuana could increase up to 50
percent, many see a chance for new business.

"We've developed a lot of products that would do well on the open
market," said Jonathan Kolodinkski, who runs a medical marijuana
dispensary in Soquel well-known for its pot-laced ice cream. "I think
there's a lot of opportunity here."

Still, Kolodinkski like others in the industry has concerns about how
the region's small businesses, which have adapted to the current
commercial landscape, will fair in a bigger, legal
marketplace.

Already certain communities like Oakland, hoping for a boost to the
local economy, are trying to get a leg up on the competition by
courting large-scale growers. Out-of-state businesses, meanwhile, are
eyeing ways to enter California's new market, should the proposition
pass.

The Santa Monica-based Rand Drug Policy Research Center estimates the
price of marijuana, as more parties enter the industry, would fall by
as much as 80 percent, presenting an additional barrier for small
businesses to stay afloat.

There's a flip side to lower prices, however. Consumers, who now pay
upward of $300 an ounce -- enough for a couple dozen joints -- would
save money.

"I understand the economic motive that is driving the No on 19
campaign, but I'm convinced this is a huge advantage for medical
marijuana patients," said Santa Cruz attorney Ben Rice, who has carved
out a niche practicing marijuana law. "It will make the medicine
cheaper and easier to get."

Perhaps the biggest unknown for a legal marijuana trade is how it will
be regulated. While the city of Santa Cruz has set up rules for how
medical marijuana is bought and sold -- the county is in the process
of doing the same -- neither has considered regulating a recreational
marketplace.

That's not the case everywhere. Nearly a half-dozen California cities,
including San Jose and Berkeley, are asking voters to approve taxes on
marijuana sales in anticipation of Proposition 19 passing and local
regulations being enacted.

The tax revenue that marijuana sales would generate has been a selling
point for proponents of the measure. With a $50 tax per ounce, which
has been proposed by state Sen. Tom Ammiano, D-San Francisco, the
state could bring in more than $1 billion annually, according to the
Rand report.

Of that, roughly $6.5 million would flow to Santa Cruz County,
according to a study earlier this year by the Santa Cruz County Grand
Jury. The tax revenue, though, is contingent upon local jurisdictions
permitting the trade.

"My guess is that Santa Cruz County will eventually follow the lead of
so many other cities and counties around the state, passing new laws
and requiring taxation and fees," said Rice. "If Proposition 19
passes, I'll certainly be pushing to get something on the ballot."

[Sidebar]

PROP. 19 Q&A

What does Prop. 19 do?

The ballot measure legalizes marijuana for all people 21 and
older.

How much marijuana would I Be allowed to have?

Under Prop. 19, users could possess up to an ounce of pot. People
would be allowed to grow marijuana on private property in an area of
up to 25 square feet. Larger grows would be subject to
yet-to-be-written regulations.

Where could I light up?

Pot smokers would not be allowed to smoke in public or in the presence
of minors. Marijuana use would remain illegal while driving, and
workplace drug rules would stand if an employee's job performance is
compromised.

Where could I buy marijuana?

Prop. 19 calls on the state and local governments to develop
regulations for the production, distribution and sale of marijuana;
cities and counties could choose not to permit a commercial trade as
well. So exactly where marijuana would be sold is yet to be determined.

What about the federal government's opposition to pot?

The federal government considers all marijuana use illegal. The Obama
administration, however, has signaled it won't crack down on medical
marijuana sales, though it recently said it would not tolerate
recreational use.