Los Angeles Destroys Functioning Businesses in a Recession

But that's OK with the city-those businesses are selling medical marijuana


Los Angeles has lost over 150,000 jobs in the past year, is on the brink of bankruptcy, and experienced an unexpected 16 percent decline in sales tax revenue last year. And it's located in a state with its own dire fiscal situation that is also facing unexpected gaps in tax revenue. Yet this week the Los Angeles City Attorney's office made a move that's certain to make things worse for its citizens: forcing over 400 functioning businesses to close shop, under threat of jail time.

Don't worry, though. It's no big deal. Those businesses are only selling medicine.

Medical marijuana, that is. As detailed in my May Reason magazine cover story, Los Angeles struggled for years with regulating medical marijuana storefronts—which thrived in L.A. as in no other city. In January the city finally came down with an ordinance imposing a variety of new restrictions, including how the businesses handled cash, provided security and lighting, and paid their employees, as well as insisting that the shops were not technically allowed to make a profit.

But the ordinance's most important effect will be to reduce the 500-plus functioning storefronts serving the city's medical marijuana community to a mere 70 (with some possible grandfathering that might bring the eventual total higher).

On June 7, the ordinance is finally supposed to go into effect. Under the law's tenets, any functioning medical pot store that did not register with the city prior to a November 2007 moratorium is outlawed—despite the fact that in October 2009 a judge declared the moratorium legally void. Thus, as the L.A. City Attorney's office declared in a  letter issued to 439 stores on Tuesday:

Dear Business/Property Owner:

On June 7, 2010, Article 5.1 of Chapter IV of the Los Angeles Municipal Code (Medical Marijuana Collective) will become operative.…Section of Article 5.1 provides that "any existing medical marijuana collective, dispensary, operator, establishment, or provider that does not comply with the requirements of this article must immediately cease operation…."

The establishment at the above referenced address is operating as a medical marijuana provider and did not register with the City Clerk prior to November 13, 2007. Consequently, this establishment does not, and cannot, comply with the requirements of Article 5.1. Under Section, this establishment must therefore immediately cease its operations…..

Violation of any section of the Los Angeles Municipal Code is a misdemeanor, punishable by six months in jail and/or a $1000.00 fine…and a nuisance, subject to a daily civil penalty in the amount of $2500.00. In addition to existing remedies under federal, state, and local law, Section of Article 5.1 authorizes the City to seek injunctive relief, revocation of the certificate of occupancy for the location, disgorgement and payment of any and all monies unlawfully obtained, costs of abatement, costs of investigation and attorney fees.

That's a very official, very stern way of saying that a business which is paying taxes, paying salaries to employees, providing support for companies and families, and providing medicine to satisfied patients/customers, has to stop doing all those positive things—some of which directly benefit the government—simply because the city says so.

The reasons are stated, lamely and without support, in the preamble to the ordinance, with some jabber about crime, health hazards, and public safety and welfare. That jabber, as my Reason feature shows, is unsupported by any rigorous evidence beyond the petty complaints of a small number of very vocal citizens.

L.A. attorney Eric Shevin, an experienced medical marijuana litigator, told me this week he's working on a legal challenge to these shutdown letters, one that might be based on the notion that order takes away a vested property right without due process. (He's also working on a larger challenge to the ordinance itself, as is the group Americans for Safe Access.)

Shevin takes heart from an April decision from Superior Court Judge Robert S. Boyd in California's Sonoma County. Boyd's decision came in a case involving the attempt to shut down a medical marijuana storefront in Sonoma County. He concluded that under a doctrine derived from the Supreme Court's 1985 City of Cleburne decision, any California law that prejudicially disadvantages medical marijuana stores fails legal muster if it is based solely on "groundless assumptions, prejudices, and fears" and has no rational basis. Shevin thinks L.A.'s ordinance could be successfully challenged on similar grounds.

And this week's flood of shutdown letters isn't the end of the trouble that the new ordinance will cause L.A. businesses in the coming months. From the time the ordinance goes into effect, those medical marijuana stores that were registered with the city prior to the moratorium in 2007 (around 137 are still thought to be operating) will have to prove to the city they are meeting all the other requirements of the ordinance and apply to operate legally going forward.

But staying legal will be very tricky, thanks to the very tight buffer requirements that force legal pot shops to be 1,000 feet away from a variety of "sensitive uses" (including libraries, schools, youth centers, churches, or other marijuana stores) and bars them from being adjacent to or across an alley from residential property. Most L.A. retail space, of course, is next to or across an alley from residential property.

While neither city officials nor the medical marijuana community has yet fully mapped the city to see what legal areas remain available for pot stores, local marijuana collective operator and activist Don Duncan says that although registered stores will theoretically have six months to get fully legal, they have just one month to locate and inform the city about their new legal locations.

And Duncan points out that the buffers aren't the only difficulty: "It's also finding property that's not occupied with a landlord willing to rent" to medical marijuana facilities, which can be the target of constant legal hassles from localities and federal cops. Duncan, who is probably the most well-connected man on the L.A. medical marijuana scene, says he only knows four stores that have found workable properties, while another two are already OK where they are, "which is a pretty small number considering 90-100 are looking around the city."

Attorney Eric Shevin also adds that the ordinance requires legal marijuana cooperatives to be in compliance with state law. That's a very tricky proposition, since it will be L.A.'s city and county attorneys judging whether those shops are compliant. In the city and county's opinion, backed up by one local judge but in clear contradiction to the state's guidelines about medical marijuana, if you are exchanging cash for pot even to certified medical marijuana patients, you are breaking the law.

Thus, a city facing economic trouble will kill thriving businesses, destroy the entrepreneurial dreams of individuals and families, and cause great inconvenience to qualified patients. And that's all in the name of making it harder for those patients to obtain a plant that the state of California legally permits them to obtain, while solving no social or civic problem larger than quieting a small handful of noisy citizens who convinced the L.A. City Council that pot stores made their neighborhoods feel icky and undesirable. It's all in a day's work for the Los Angeles City Attorney's office.

Senior Editor Brian Doherty is author of This is Burning Man (BenBella), Radicals for Capitalism (PublicAffairs) and Gun Control on Trial (Cato Institute).

NEXT: What Ever Happened to Atticus Finch?

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  1. Holy shit I was actually able to post here today. And I’m the first one. Nothing more profound to say. Have a nice day reason.

  2. I recently saw a TV special on the marijuana farms up in the Sierra Foothills, near Sequoia N.P. One DEA guy who had been fighting to eradicate the stuff in that area for the last twenty years said “I’d say we are losing the war.”

    They spend million of tax dollars flying around in helicopters, finding the farms, ripping out the plants, and making a few arrests. Then the stuff springs up somewhere else. So what else is new?

    1. The more you tighten your grip, TarkinDEA, the more star systems will slip through your fingers.

  3. can a store remain if it sells other products besides those directly related to marijuana?

  4. And it’s located in a state with its own dire fiscal situation that is also facing unexpected gaps in tax revenue.

    Unexpected by who? What kind of idiot wouldn’t expect California’s tax receipts to crater, given how its economy as a whole is cratering?

    1. “Forseeable consequences are not unintended.”

      As compiled by the great RC Dean.

  5. I swear, it’s like politicians are actively trying to destroy the country’s economy. Is there one major thing that’s been done yet that isn’t completely counterproductive? Anything?

    Shit, the economy is in the gutter, but we need money, so let’s raise taxes! Let’s create massive entitlement packages when unemployment is super high! Let’s make new regulations when the market is shaky because people just can’t anticipate what the government is going to do!

    1. They are Epi. They are.

      I smell the rotting putrid flesh of yet another bailout corpse.

    2. let’s not forget just force some well performing but icky businesses to close.

    3. Don’t forget giving billions to companies that are destroying wealth!

    4. Maybe starting a few more wars would fix the problem…

    5. It’s as if politicians are completely unaware of what the core functions of government are anymore. I’m in St. Louis, and for years the infrastructure has been crumbling, the streets in parts of the city are slaughterhouses and schools are warehouses of ignorance. Yet City Hall busies itself with grandiose plans of convention hotels and pro sports stadiums. It’s madness.

  6. So California is shooting itself in the foot and hopping around on it. This is news?

    1. Other than the fact that those who don’t live in California are now footing (ha!) the Doctor bill for California’s wound, no.

  7. bong?en?freu?de, noun, pleasure derived by less conformist drug users from potheads’ continual jiltings by the Man whose love they so dearly covet.

    “Tax us!” Fuck you.

    1. I like it. There have been a couple times when that was apropos. I never went to a dispensary because I thought it foolish to have my driver’s license recorded for purchasing an illegal substance. Everyone thought I was overreacting. That is until our douchebag DA tried to force the dispensaries to disclose their patient lists. He didn’t succeed THAT time. Oh yeah lots of bongenfreude there.

  8. In January the city finally came down with an ordinance imposing a variety of new restrictions, including how the businesses handled cash, provided security and lighting, and paid their employees, as well as insisting that the shops were not technically allowed to make a profit.

    Hey, tax-us-regulate-us-set-us-free crowd, how’s that freedom?

  9. I guess this thread is as good as any to indulge my narcissism. I landed my best twitter follower ever, yesterday. The one and only Gary Johnson apparently liked my tweet to the Washington Journal that Bill Richardson couldn’t carry Johnson’s jockstrap. Unfortunately, they didn’t read the tweet to Richardson on the air.

    1. Alright Mr. Twitter, if you are the virtuoso tweet that you claim you are, why so many words?

      1. You’re right, way too wordy. And as a former violinist, I am happy to take on the title of Mr. virtuoso tweeter.

        1. Didn’t he save the world from Kim Jong-Il by upstaging Alec Baldwin?

          1. No, that was Gary Johnston.

  10. Ah, the land of fruits and nuts and the gift that just keeps giving.

    Two monkeys humping a football doesn’t begin to explain whats happening in LA

    1. At least when primates molest footballs, something gets done!

      Mainly the football.

  11. So who is really behind this shutdown? Are the grandfathered dispensaries the ones paying the bureaucrats to shut down their newer competitors?

  12. What about the November ballet initiative in Kalifornia to legalize, regulate, and tax marijuana for non-medical needs…that is recreation? How will that effect this situation as polling shows it is likely to pass? If the ballet initiative to legalize pot passes in Kaliforina that will be the only thing good that the State has done for America. Maybe the failed Socialist Mexican Republic of Kalifornia will get one thing right that will actually benefit the country.

    1. Ballet Initiative – a 501 (c) 3 nonprofit organization whose mission is to raise the profile of dance in the Saint Louis community through preservation. See

      I knew those bastards were secretly trying to destroy the country through sex, drugs, and rock n’ roll!

  13. Well, clearly violent crime has gone up, church attendance is down, and the general riffraffiness of LA has increased 3%. Something must be done with alll those druggies. Maybe if we make it difficult to get from a store, they won’t smoke pot anymore. Thats the ticket.

  14. Well we all know that they’re so busy fighting against the ebul REEFER MADNESS that they had to give amnesty to illegals ’cause it’s just too hard to stop criminals when they’re so busy trying to shut down tax paying businesses that are employing people.

    WTF are these morons thinking?

    1. WTF are these morons thinking?

      That we’ll happily sink with California when it falls into the sea…

  15. Damn the man, save the empire. The more they tighten their grip the more law abiding citizens turn to the streets, don’t pay taxes, a break their laws. U know what, F*ck em, vote in november, change their laws and stand up for change

  16. Hard to believe they had any existing problems generating tax revenue with over 400 dope houses operating.
    I thought legal weed was supposed to cure all our tax base issues?

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  18. This whole sorry affair is the 21st century version of the 1937 Marijuana Tax Stamp scam. The government didn’t make the stuff totally illegal, you just needed to have a valid tax stamp to possess the stuff. Only problem being that they NEVER issued ANY tax stamps for it.

    LA’s city council is trying to do the same thing. You’re allowed to own and operate a dispensary; it’s just that the regulations defining what a legal dispensary constitutes are written in such a way that it is impossible to ever meet the criteria. Nice end run around state law; problem solved. All that’s left is to take them to court. I just hope you can find a sympathetic judge.

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