OBJECTIVE OF POT TAX MAY GO UP IN SMOKE

In the desperate search for revenue to save the city of Los Angeles
from slashing services, could medical marijuana be the tax cash cow
that keeps the city afloat?

The answer is hazy.

In fact, the Los Angeles leaders who put Measure M on the March 8
ballot can't even agree on how much money a 5 percent medical
marijuana tax will bring in - or if it will generate any money.

When the City Council voted last fall to put MeasureM on the ballot,
officials estimated the tax could generate $3 million to $5 million a
year. The Yes on Measure M campaign puts the revenue target at $10
million. And Councilman Paul Koretz, who is leading the charge for
the tax, figures L.A. could net $15 million a year.

Meanwhile, City Attorney Carmen Trutanich's office has questioned
whether MeasureM will generate a dime for Angelenos. That's because
the city of L.A. requires permitted dispensaries to be registered
nonprofits, and nonprofits can be exempt from paying the city's gross
receipts tax.

So far, at least two dispensaries have been granted a nonprofit
exemption from the city's Department of Finance, which collects the
business tax. It's hard to say how many more will qualify for a tax
pass - the California Franchise Tax Board and the IRS don't put
medical marijuana collectives on par with the charities and religious
groups that typically claim tax-exempt status.

Koretz and other supporters of Measure M say they think dispensaries
will pay the tax of $50 per $1,000 in gross receipts, no matter their
nonprofit status. Just look at Oakland, they say.

Indeed, the city of Oakland currently levies a 1.8 percent tax on a
handful of permitted dispensaries. The city expects to collect more
than $400,000 for 2010. Residents voted to increase the tax to 5
percent last November and Oakland estimates it will net $1.5 million for 2011.

But Oakland has a very different rapport with its dispensary
community than L.A. does. It's a city, after all, with its own
medical marijuana district called Oaksterdam, and city officials have
sought to embrace, permit and expand a medical marijuana industry.
Los Angeles, meanwhile, has been tied up in the courts for the last
year fending off lawsuits from dozens of medical marijuana groups
fighting the city's dispensary ordinance.

Oakland is really the only test case Angelenos have to assess the
possible success of a pot tax. Last year, voters in half a dozen
cities passed medicinal marijuna business taxes, but most haven't
implemented the tax yet.

So, will a medical marijuana tax give L.A. the cash infusion it needs
to reopen library on Mondays or restore Fire Department staffing or
fill more potholes? Don't hold your breath.