'SO MANY DIMENSIONS' TO POT QUESTION

Marijuana Legalization Has The Power To Rock Humboldt County, But How
Is Anyone's Guess

If the nation's 13-year experiment with alcohol prohibition did
anything, it made the average drink a lot more expensive.

When Prohibition was passed in 1920, the price of beer soared more
than 700 percent, the cost of brandies shot up more than 400 percent
and general spirit prices rose by about 270 percent across the board.
Within a year of the law being repealed in 1933, prices had dropped 30
percent, beginning what would be a steady decline, according to a
policy analysis for the Cato Institute.

It's the prospect of a similar price plunge that has some on the North
Coast squirming at the idea of California voting to legalize marijuana
after decades of state and federal prohibition. The unease makes
sense, considering a recent study by Jennifer Budwig, a local banker
whose thesis concluded the marijuana industry pumps at least $400
million annually into the Humboldt County economy. If that money were
to disappear, it would cause a 25 percent reduction in local economic
activity. And that's with Budwig using what, by all accounts, are
extremely conservative estimates.

It's a thought that strikes fear not only into the hearts of pot
growers but also the owners of local car dealerships, restaurants and
boutiques. It's money that's spent for child daycare, to buy real
estate and to start local businesses. In short, it's money that likely
permeates just about every nook and cranny of the Humboldt County economy.

In fact, the legalization conversation -- which is gaining steam with
five initiatives circulating to qualify for the November ballot --
carries so many implications for Humboldt County that the Greater
Eureka Chamber of Commerce recently received a presentation on
Budwig's thesis, which focuses not only on economic impact but also
potential ramifications of legalization.

"Anything that's out there that has the potential of adversely
affecting or positively affecting our members, we have a dog in that
fight," said J Warren Hockaday, the chamber's CEO. "Whether that comes
to advocating a particular type or matrix of legalization over
another, I don't know if we would go there. But we might."

Hockaday's last comment underscores two general feelings held
throughout the county -- that legalization is a slow train barreling
down on Humboldt and that the manner in which it occurs is just as
important as whether it occurs. And, no matter the form, legalization
will likely bring unforeseen impacts, all of which will affect
Humboldt County's marijuana trade and, consequently, its economy.

Humboldt State University professor of economics Erick Eschker said
even if you look at legalization in its simplest form, it becomes a
complicated equation. Eschker said risk generally plays a huge factor
in driving prices in a black market economy, so it would be a safe bet
that alleviating the risk through legalization would cause a price
drop.

However, the economist said that doesn't necessarily mean a huge hit
to the local economy.

"It's price times quantity -- that's the value of what's produced," he
explained. "So, with legalization, you'd have the market price
falling, but you'd also have a lot more production. The question is
which one of those would be greater."

In the case of alcohol prohibition, it's clear production ultimately
outpaced the decline in price, and the industry has a far greater
national economic impact than when alcohol was illegal.

But with the current state of California's relationship with the
federal government over medical marijuana, it's not even safe to
assume statewide legalization would reduce the risk involved in the
marijuana trade. In fact, Budwig notes, legalization in California
could draw a massive federal crackdown.

This could serve to deter large-scale producers from getting into the
industry -- a huge fear of many a Humboldt County grower -- but,
depending on the crackdown's scope, might also shift the risk paradigm.

When someone gets busted locally for a commercial grow operation, it's
a safe bet they aren't going to jail. Generally, their plants get
destroyed, their cash seized and they end up on probation. Now, with
California's new prison realignment program, it's extremely unlikely
these people would be sent to prison. At worst, they would spend some
time in a local jail.

Federal marijuana laws are a whole different ball game and can land
someone behind bars for up to a year for possessing a joint. Someone
busted growing more than 100 plants or more than 100 kilograms is
looking at a mandatory sentence of between five and 40 years in a
federal prison, according to the National Organization for the Reform
of Marijuana Laws.

"Any time the risk goes up that it will be confiscated and/or that you
will be put in jail, that's going to make people less willing to
produce, and the price will go up," Eschker said.

Assuming there is no federal crackdown, there are still many unknowns,
and most swirl around the manner of legalization. Would legalization
limit mass production, giving a leg up to Humboldt County's
comparatively small-time growers? Would it create a state regulating
agency -- like the Department of Alcohol Beverage Control -- and a
uniform set of ground rules? Or would the new, legal marijuana
industry be regulated by each county, leaving local control but a
state with 58 separate sets of rules?

Local growers are split on the issue and on what path to legalization
would leave Humboldt County with the greatest competitive advantage.
Some say they are petrified of Big Tobacco turning California's
Central Valley into one giant marijuana farm, while others say there's
no way such factory farms could turn out the high-grade marijuana that
made Humboldt County famous.

With alcohol, the market is clearly large enough for both the mass
producer and the niche manufacturer -- with craft beers and micro
brews in the cooler with Budweiser, and two-buck-chuck and $100
bottles of wine on liquor store shelves. Would the marijuana market be
the same?

Eschker said it's hard to tell.

Generally speaking, Eschker said, one of the biggest factors in making
Humboldt County the marijuana producer that it's become is its
remoteness. Growers can operate in the hills with general impunity --
state and federal authorities visit only occasionally, and local
police don't have the resources to wage an all-out war on marijuana.
In her study, Budwig quotes law enforcement sources as saying the
marijuana they eradicate annually represents only 1 to 2 percent of
the total that's out there.

Eschker said that remoteness, while an asset in a black market, would
almost instantly become a liability in a legal one.

"If it's legalized, that benefit of remoteness turns into a problem
because it would add costs for shipping and transporting," he said.
"Also, I would suspect strongly that production would spring up in
major metropolitan areas."

However, if each county is left to regulate its own marijuana
industry, would more conservative areas of the state rebel and
institute growing moratoriums? If so, that could leave more liberal
Humboldt County -- where pot growing is already widely accepted -- a
huge market to supply.

Another factor, Eschker said, is the Silicon Valley
effect.

Because of its remoteness, its reputation and other factors, Humboldt
County has a collective brain trust of marijuana growers who are very
good at what they do and likely benefit from being near one another
through sharing ideas and new methods. Eschker said that right now,
those growers are to some extent stuck here because, due to the
aforementioned remoteness, it is a good place to work in an illicit
trade.

If marijuana was legalized and these folks could go ply their trade
anywhere in the state, what would happen? Would they recognize the
benefits of proximity and stay huddled together, as happened with
techies in the Silicon Valley? Or would there be a brain drain, as
companies in other areas of the state lured Humboldt County's best and
brightest to grow elsewhere?

As Humboldt County plods through the process of putting together an
ordinance to govern its medical marijuana industry, many have urged
policymakers to also be forward thinking and to plan for
legalization.

Some have gone so far as to suggest that Humboldt County could become
the Napa Valley of marijuana, with showcase family farms, renowned
varieties and tasting rooms. The thinking is that people can have a
glass of wine anywhere, but they flock by the thousands to Napa
Valley's wineries to sip chardonnay while overlooking the vineyards in
which it was produced. Why wouldn't people do the same with marijuana?

Humboldt County Convention and Visitors Bureau Executive Director Tony
Smithers said he's simply not buying it, pointing to a recent
presentation by "marketing guru" Andrew Davis, who offered a detailed
analysis of how many people do Google searches for redwood trees
versus marijuana. Smithers said redwood tree searches lapped those for
marijuana.

"It wasn't even close," Smithers said. "It was his way of saying, 'You
guys have to know what side your bread is buttered on."

Smithers said Humboldt County's current image as a tourist destination
also depends on a "family-friendly" feel. Marketing to marijuana users
would jeopardize that, he said.

"I think any potential benefit of marijuana tourism would be canceled
out by the negative image," he said.

Lost in all this talk of dollars and cents is the fact that marijuana
legalization is, at its core, a social question.

"There are just so many dimensions to this issue," Hockaday
said.

Is prohibition simply creating a criminal class where there would not
be one? Would legalization turn more children on to marijuana and, in
turn, other drugs? Is marijuana different from alcohol? Would
legalization increase or decrease the ancillary crime associated with
the marijuana industry? Are government's limited resources better
spent on enforcement and prosecution or on treatment?

Hockaday said he doesn't have all the answers. Knowing how voters
ultimately answer the questions may impact the chamber's members; he
said he's going to keep a close watch.

"There are an awful lot of factors you need to consider," he said.
"Certainly, we'll be watching this pretty carefully."