Val­ley of­fi­cials fear keep­ing ‘black mar­ket alive’ as new le­gal pot reg­u­la­tions loom

The Fresno Bee - - Local - BY TIM SHEE­HAN tshee­han@fres­nobee.com Tim Shee­han: 559-441-6319; Twit­ter: @TimShee­hanNews.

Cal­i­for­nia is on the verge of putting a com­plex set of reg­u­la­tions in place to gov­ern com­mer­cial mar­i­juana cul­ti­va­tion, dis­tri­bu­tion, man­u­fac­tur­ing, test­ing and sales – but not all of the rules pro­posed since the pas­sage of Propo­si­tion 64 two years ago are sit­ting well with cities and coun­ties.

Lori Ajax, chief of the state’s Bu­reau of Cannabis Con­trol, was in Fresno on Thurs­day for a meet­ing of her agency’s Cannabis Ad­vi­sory Com­mit­tee.

She ad­dressed a lun­cheon meet­ing of the Maddy In­sti­tute, a pub­lic pol­icy and lead­er­ship pro­gram at Fresno State. Her visit came just two days af­ter vot­ers in Fresno ap­peared to ap­prove Mea­sure A, which au­tho­rizes the Fresno City Coun­cil to es­tab­lish taxes on mar­i­juana busi­nesses.

Ajax said sen­ti­ment among most cities and coun­ties in the Val­ley “is to ban com­mer­cial cannabis ac­tiv­ity, and that’s OK be­cause the law gives you lo­cal con­trol to do that.”

But for cities like Fresno that are be­gin­ning to take steps to­ward po­ten­tially al­low­ing some mar­i­juana busi­nesses, she said, “there’s ben­e­fit to be­ing able to reg­u­late this, for the lo­cals to have con­trol about what li­censes come into your city or county and how you reg­u­late that.”

Where the state and many city and county agen­cies are at odds, how­ever, in­volves how and where mar­i­juana de­liv­ery op­er­a­tions can do busi­ness.

“One of the things we have in our regs that’s been very con­tro­ver­sial, and it’s a chal­lenge, is the de­liv­ery piece,” Ajax said. “If we is­sue a li­cense for de­liv­ery, which is a re­tail li­cense, they can de­liver any­where in the state, re­gard­less of whether there’s a ban in place (lo­cally) or not. …”

“Of course, a lot of cities don’t feel that way,” she said. “They feel that if they have a ban, we’re erod­ing their lo­cal con­trol at that point. The state looks at it as, when we is­sue a li­cense, we don’t is­sue just to a premises, but you can con­duct com­mer­cial ac­tiv­ity all over the state.”

Mar­i­juana in­dus­tries fa­vor the state’s in­ter­pre­ta­tion. “They don’t know when they’re driv­ing down the street; some­times you cross a street and go from the city to the county” or from one city to an­other with dif­fer­ent lo­cal rules, Ajax said.

The state can­not is­sue li­censes to busi­nesses, how­ever, un­less the ap­pli­cant first has won the ap­proval of the city or county in which they want to do busi­ness.

And there are three dif­fer­ent li­cens­ing agen­cies, de­pend­ing on which seg­ment of the in­dus­try is in­volved: the state De­part­ment of Food and Agri­cul­ture for cul­ti­va­tion op­er­a­tions, the De­part­ment of Pub­lic Health for the man­u­fac­ture of cannabis prod­ucts in­clud­ing ed­i­bles and oint­ments, and the Bu­reau of Cannabis Con­trol for dis­tri­bu­tion, sales and test­ing.

Two pub­lic of­fi­cials lis­ten­ing to Ajax, Rep. Jim Costa, D-Fresno, and Fresno City Coun­cil­man Clint Olivier, both ref­er­enced the po­ten­tial for reg­u­la­tory and tax bur­dens to con­trib­ute to a con­tin­u­a­tion of the il­le­gal mar­i­juana trade, much as Pro­hi­bi­tion did for il­le­gal al­co­hol and boot­leg­ging in the 1920s and ’30s.

“Some lo­cal of­fi­cials can get greedy and see this as a cash cow, but then it cre­ates a huge over­head for the busi­nesses,” Olivier said. “We don’t want to force peo­ple back to the il­licit mar­ket.”

“If com­mu­ni­ties choose, for un­der­stand­able rea­sons, not to al­low dis­pen­saries, when it’s harder to ac­cess I think, … you con­tinue to keep the black mar­ket thriv­ing,” Costa said.

“There’s a trade­off be­tween peo­ple who want to have ac­cess to cannabis and find it ex­tremely dif­fi­cult to do. They have their sources as they had be­fore in the black mar­ket, the peo­ple who are grow­ing in the hills and keep­ing that mar­ket alive.”

Ajax ac­knowl­edged the need to find the right bal­ance on reg­u­la­tion and tax­a­tion.

“Our reg­u­la­tions cur­rently are 170 pages of text of re­quire­ments, just for the bu­reau,” she said. “And then you look at them pay­ing li­cense fees, at the lo­cal level and at the state level, and our li­cens­ing fees range from $500 to over $120,000 ev­ery year. And then you add on the state cul­ti­va­tion tax and ex­cise tax and the re­tail sales tax. And you see that the price of cannabis is go­ing down, so they’re not mak­ing the prof­its they prob­a­bly once were.”

“Reg­u­la­tion costs busi­nesses, it re­ally does, and we all have to be mind­ful of that, even the state and how we set our fees,” Ajax said.

RICH PE­DRON­CELLI AP

Lori Ajax, chief of Cal­i­for­nia’s Bu­reau of Med­i­cal Cannabis Reg­u­la­tion, in the bu­reau’s of­fice in Sacra­mento. Ajax and her staff have crafted reg­u­la­tions and rules gov­ern­ing the state’s emerg­ing le­gal pot mar­ket, in­clud­ing cul­ti­va­tion, dis­tri­bu­tion, man­u­fac­tur­ing, test­ing and sales.

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