Tuesday, July 6, 2010

City of Oakland: Pot Farm Taxes To Net $38 Million Per Year

By David Downs
Tue, Jul 6, 2010 at 1:46 PM

The City of Oakland's cutting-edge approach to its medical cannabis sector is about to make national headlines again with the long-awaited release of city plans for licensing large-scale marijuana grows. If the draft ordinances pass, the city stands to reap almost $38 million in taxes per year by growing one-fifth of all statewide medicinal marijuana.

The city is looking at permitting up to four large-scale grows with no limitations on each farm's size. The rules would still let patients and caregivers home-grow up to 96 square-feet, but larger grows would require a $211,000 cultivation permit to be issued starting January 1, 2011.

The potential rules go before the city's Public Safety Committee on Tuesday, July 13, and represent the first attempt by the city at regulating its numerous indoor cultivators.

The staff report from Councilman Larry Reid and Councilwoman Rebecca Kaplan's offices says permitting large-scale grows will increase safety by undercutting the price of homegrowers; who are prone to fires and robberies. The Oakland Fire Department and Police Department told city staff of seven cannabis-related electrical fires in 2008 and 2009, though “many more cannabis-related fires have likely gone unreported.” Residential electrical fires in Oakland rose from 133 in 2006 to 276 in 2009. Police tallied eight robberies, seven burglaries, and two homicides clearly linked to cultivation in the last two years. “Again, these statistics are likely to understate the extent of the problem.”

"You've got people who are going around putting their own systems in place the wrong way and the fire department says there is potential for even greater fires to happen in residences," Councilman Reid told Legalization Nation.

Permittees will be subject to heavy regulation including quarterly reports, a perennial state of audit, taxes, a $5,000 application fee, and a $211,000 yearly registration fee. Potential permitees would be ranked on a points system by the planning department, with bonus points for local ownership, local hiring, third-party oversight, and community benefits.

The Alameda County Agricultural Commissioner would help monitor pesticide and pest testing at permitted farms, and the Department of Weights and Measures would be involved as well. THC testing mandates in the draft rules present a potential boon to the nascent cannabis testing industry.

Most proposed farms range in size from 20,000 square feet to 100,000 square feet, the city says. Any grower who didn't have a permit would be limited to less than 96 square-feet, and would be required to lock up their farm, keep no more than 49 ounces on-site, hardwire all electrical, get city approval for rewiring, and maintain a low profile without neighbor complaints.

The draft rules would also up the number of local dispensaries from four to six, allow for them to be near each other, allow on-site consumption, mandate THC testing, track how much dispensaries get from city grows, and increase annual fees from $30,000 to $60,000.

The city says increasing the amount of dispensaries prevents market domination by any particular one. That explanation would seem to contradict permitting just four huge, large-scale grows where the city is essentially picking a winner; a fact that has some local dispensaries grumbling.

The City of Oakland's four dispensaries made $28 million in gross sales in 2009 and dispensary sales are up 40 percent from 2008. Locally, they dispensed 6,000 pounds of cannabis last year, which required 45,000 square-feet of growing space. The state as a whole consumes an estimated 175 tons of medical cannabis per year, which requires 1.75 million square-feet of growing space. Oakland assumes it can grow 20 percent of the state's supply on a combined 350,000 square-feet, netting the city almost $38 million annually.

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