Complex California Pot Act Created Unseen Problem

Governor signs law to fix flaw that caused cities to ban marijuana cultivation

If you're looking for an example of why last-minute legislative rewrites can be problematic, then consider the package of medical-marijuana bills that passed during last year's frenzy at the California state capital. Such "gut and amends" are filled with complex language or substantially rewritten at the last moments of a legislative session, with no time for full vetting of the final product.

But there's a reason to give the public and affected interest groups time to closely examine the final details of any major proposal. California voters overwhelmingly approved Proposition 215, legalizing marijuana's use for medical purposes, back in 1996. It's hard to understand why such measures needed to be rushed through after nearly two decades of dawdling.

The problem: The Medical Marijuana Regulation and Safety Act included a paragraph that gave state officials full authority to license and regulate medical marijuana in any cities or counties that did not adopt specific ordinances regulating or banning marijuana cultivation by March 1. With the deadline looming, localities began hurrying through cultivation bans.

"Fearful of losing their power to set policy to the state, dozens of cities chose to ban all commercial pot-growing within their borders during the last three months," reported the Associated Press in a Feb. 4 report. "Some also prohibited authorized medical marijuana users from growing their own pot."

The original bills "will bring a multi-billion dollar industry that has grown up largely in the shadows into the light," according to one of its sponsors, Assemblyman Jim Wood (D-Healdsburg). "Ultimately, the goal is to provide Californians with the legal, consumer, and environmental protections we have come to expect from any other industry."

Whether the laws do so is the subject of an ongoing debate, but no one had anticipated the drafting error that would lead cities to quickly ban dispensaries and cultivation to protect their authority from state control. So Wood cosponsored AB 21, an emergency bill that passed without any "no" votes and was quickly signed into law by Gov. Jerry Brown (D).

AB 21 deletes the March 1 deadline and "adds language stating that the exemption does not limit or prevent a city or county from exercising its police authority," according to the official Assembly analysis. The quick correction is good news. What good are new regulations governing a product that is subsequently banned virtually everywhere?

The drafting error highlighted what critics see as a more fundamental flaw in the legislative process. They say it gives localities too much power to limit a voter-approved industry and not enough incentive to work with medical-marijuana providers and patients. Supporters, including many existing marijuana clinics, like that the state is finally recognizing the legality of their industry, even if it gives the state and localities so much control.

Some say the best way to bolster the medical-marijuana industry is by taxing it. Even those who oppose new and increased taxes have to face this reality: a financial incentive would give local governments an incentive to encourage a thriving marijuana industry.

Last week, Sen. Mike McGuire (D-Healdsburg) introduced the Marijuana Value Tax Act (SB 987), which would impose a 15 percent tax at the point of sale on medical marijuana sold at clinics. According to a statement from McGuire's office, "30 percent of all revenue (from the tax) will go to the Bureau of Medical Marijuana Regulation to distribute via grant programs designed specifically for local agencies who oversee the regulation of cultivation, processing, manufacturing, distributing and sale of marijuana."

If that passes, we might see more cities follow in the footsteps of the fiscally troubled High Desert city of Adelanto, which in November approved an ordinance allowing the cultivation of medical marijuana—one of only two cities in the state to allow it. The result, as the Orange County Register reported, is an "unlikely land rush that is transforming this desert town" with soaring land prices and 27 companies already gaining permits to grow marijuana.

Other tax efforts continue. The state's tax agency, the Board of Equalization, continues to work on proposals to address ongoing problems that make it difficult to collect taxes from medical-marijuana businesses. For instance, the agency generally forbids cash payments—yet federal law bans marijuana businesses from having bank accounts. It's a Catch-22. Some BOE officials have proposed a state-run banking system to help these businesses get around this payment obstacle.

All of these tax and regulatory issues may be a precursor of things to come, as California voters are likely to face a November ballot measure that would legalize marijuana for recreational purposes, as has been done in some other Western states. We can only hope the Legislature doesn't wait 19 years to address the technicalities of that issue—or rely on a hastily revised bill package that may cause more problems than it fixes.

 

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