SACRAMENTO SUSPENDS PERMIT PROCESS FOR MEDICAL POT STORES

The city of Sacramento, unnerved by a federal crackdown on marijuana
dispensaries, has abruptly suspended its process for issuing permits
to medical pot stores.

The city's order of a "temporary freeze" on dispensary applications
comes as other jurisdictions around the state are also reviewing their
approach to medical marijuana outlets in light of recent federal actions.

Sacramento's move doesn't mean that the 38 medical marijuana stores
operating in the city will have to close. But halting the application
process could put in limbo their long-term prospects. Closing the
dispensaries would cut off an annual infusion of $1 million the city
had counted on in voter-approved taxes on the receipts of marijuana
stores.

In an Oct. 18 memo obtained by The Bee, City Manager John Shirey cited
the specter of federal action against dispensaries as a reason for
suspending the permitting process. Shirey also noted a recent state
appellate court ruling that found a Long Beach ordinance regulating
dispensaries runs afoul of federal law, which regards marijuana as an
illegal drug, medical or otherwise.

"As a result of the uncertain climate on medical marijuana, I have
directed staff to freeze or halt the processing of applications for
medical marijuana," Shirey said in the memo to the City Council. "As
of this time, we will not accept any new applications or set future
hearing dates until we receive further direction ... on the legal
viability of the city's medical marijuana ordinance."

Declaring that the state's medical marijuana law "has been hijacked by
profiteers," California's four U.S. prosecutors last week announced
investigations and prosecutions of dispensaries, growers and investors
throughout the state's medical marijuana market.

Drug Enforcement Administration Special Agent Casey McEnry said U.S.
agents served search warrants Monday on the MediZen Collective
dispensary on Northgate Boulevard in Sacramento but made no arrests.

Federal authorities recently indicted six men connected with the R & R
Wellness Collective in south Sacramento and seized the bank accounts
of another city marijuana store, the One Love Wellness Center, in
North Sacramento.

Last year, the City Council voted to allow as many as 38 registered
marijuana shops to apply for special permits to stay in business. The
city has since collected nearly $1.2 million in dispensary licensing
and permit fees.

So far, Sacramento has also taken in $280,000 from a 4 percent medical
marijuana tax, which went into effect July 1 and was expected to
generate $1 million a year.

Max Fernandez, director of the city Community Development Department,
said all permit hearings on dispensaries are now on hold, but that the
city will consider extending a Jan. 9, 2012, deadline for dispensaries
to either be permitted or go out of business.

"Nobody is going south or north on this," said Fernandez. "What we're
doing is waiting until the dust settles between the feds and the
state. If we're able to continue, nobody is going to lose any ground."

The city will continue collecting taxes from the dispensaries as long
as they remain open.

To date, 33 dispensaries are in various stages of the city permit
process. So far, four have been issued operating permits. They are the
midtown All About Wellness dispensary, the Fruitridge Health and
Wellness Collective in south Sacramento, the El Camino Wellness Center
off El Camino Avenue and Unity Non-Profit Collective on Tribute Road
near the Capital City Freeway.

One of the city's best known establishments, Canna Care off Interstate
80 and Norwood Avenue, was due for a hearing on its permit application
next month. Now that is off.

Canna Care co-operator Lanette Davies said she had just taken money
from her 401(k) account to pay more than $40,000 in permit fees.

"And now they've frozen it," Davies said of the process. "That damned
U.S. attorney. He just scares the heck out of these people."

Besides uncertainty over federal actions, including threats to seize
properties of landlords who lease to dispensaries or medical marijuana
cultivators, cities are concerned about an Oct. 4 ruling by the
state's 2nd District Court of Appeal.

The court ruled that Long Beach's dispensary plan with permitting
rules similar to Sacramento's was an "obstacle" to federal drug law.
The ruling departed from an earlier decision, by the state's 4th
District Court of Appeal, that the city of Anaheim couldn't simply use
federal law as grounds for banning dispensaries.

"Given the possible implications ... many city attorneys are now
examining their ordinances" for marijuana dispensaries, said Eva
Spiegel, a spokeswoman for the California League of Cities.

George Mull, a Sacramento medical marijuana lawyer, said federal
authorities are likely targeting "bad actors" already violating state
laws. But he said uncertainty is causing some dispensaries, including
two recently in Sacramento County, to close.

"Dispensaries are making calculated decisions right now," Mull said,
"to see if it's worth the risk to stay open to fight the fight."