BANKING ON BUD
California’s marijuana businesses are forced to deal in cash,
LOS ANGELES— Jerred Kiloh’s eyes narrowed as he checked his mirror again. The black Chevy SUV with tinted windows was still behind him.
It had been hanging off Kiloh’s bumper ever since he nosed out of the parking lot behind his medicalmarijuana dispensary with $40,131.88 (U.S.) in cash in the trunk of his hatchback.
Kiloh was unarmed, on his way to city hall to make a monthly tax payment and managing only stop-andstart progress in the midday traffic. He was afraid of one thing above all else: getting robbed.
That fear is a constant part of doing business in California’s flourishing medical cannabis industry, in which transactions are conducted mostly in cash, sometimes in stunningly large amounts.
“The thing I need the least right now is to have to go through any sort of money disappearing,” Kiloh said.
On Jan. 1, recreational pot will become legal in California, creating what could be the world’s largest legitimate marijuana economy. It comes more than two decades after the state gave its blessing to medical cannabis.
But the emerging marketplace with a projected $7-billion value has a potentially crippling flaw: Many people who work in it can’t use a bank. Banks don’t want the risks of doing business with companies whose product remains illegal under federal law. So while the sneaker shop next door to Kiloh’s storefront on Ventura Blvd. can send a cheque to city hall to cover its taxes, or wire the money from a laptop, Kiloh has to make a stress-filled, 24-kilometre freeway drive each month to downtown Los Angeles.
California expects to collect $1 billion in new tax revenue annually from pot within a few years. In L.A. — which is already estimated to have anywhere from 1,000 to 1,700 medical marijuana dispensaries, only about 200 of which paid city taxes in 2016 — the take is projected at $50 million next year alone.
However, governments will almost certainly miss out on money without an easy, secure way for businesses to pay. With no bank records, it will be harder for regulators to track funds and identify shady operators. And those who operate by the book will be undercut by those who don’t.
Kiloh, a 40-year-old with a greying mohawk and a degree in economics, counts 15 years in the pot industry as a seller and cultivator and is a partner and business manager at a San Francisco dispensary and the owner of the one in Los Angeles.
On a typical day, $15,000 can change hands in his dispensary, where a steady stream of customers pick from shelves stocked with 700 products, from fragrant buds and perfectly rolled joints to cannabis-infused lip balm and potent concentrates known as “shatter” that look like thin sheets of amber glass. “When now everyone makes payments through their cellphone, it’s tough to see that I’m left to the archaic version of counting money,” Kiloh said.
With all the cash on hand — he grossed $4 million last year — crime is a gnawing fear. His dispensary, on a bustling commercial strip, has been robbed twice — once by thieves breaking in through the roof.
Exiting the freeway, he tried to enter a parking lot near city hall but was turned away, forcing him farther down the block.
Once inside a garage, he looped around until he found a spot near a stairwell. Lifting his satchel from his trunk, he scurried toward the door.
The steps opened to a sun-soaked plaza teeming with people. With the cash over his shoulder, he made his way briskly toward city hall, his head swiveling.
“It’s tough when people make eye contact with you,” he said. “There is always the fear of what do they know?”
Kiloh spotted a police officer walking across the plaza — an instant source of comfort.
Finally at the granite-faced tower, Kiloh darted up the steps and slipped behind a pair of glass-and-wood doors.
He emerged about 20 minutes later, his tax bill paid, and drew in a slow, deep breath.
“You just feel the relief,” he said, “to know that I don’t have to look over my shoulder.”
“When now everyone makes payments through their cellphone, it’s tough to see that I’m left to the archaic version of counting money.” JERRED KILOH LOS ANGELES DISPENSARY OWNER