Altered state

Legalization and pot clubs grow increasingly popular,but California lawenforcement, leadersand other squares still can’t think outside of the box

A possible 2010 ballot measure sponsored by Oaksterdam University’s Richard Lee would legalize marijuana in California and potentially generate up to $2 billion in annual tax revenue for the state.

A possible 2010 ballot measure sponsored by Oaksterdam University’s Richard Lee would legalize marijuana in California and potentially generate up to $2 billion in annual tax revenue for the state.

Photo By nick miller

Daylight blinds you as you emerge from the BART station underground onto the sidewalk. Your eyes adjust and the first thing you see is President Barack Obama smiling, so lifelike you could almost reach out and shake his hand. Except he’s just a two-dimensional cardboard cutout in a window display below a sign reading “Oaksterdam University.”

Inside this hall of knowledge, the aroma is unmistakable: marijuana.

Richard Lee, founder and president of Oaksterdam University, is at the far end of the room. It’s been a busy August for the marijuana maverick: He launched an initiative that will give Californians the chance to vote for the legalization of marijuana as soon as next year, if it qualifies for the ballot, which shouldn’t be too hard. Recent polls show that nearly 60 percent of voters might approve such a proposition.

In short, 2009 has been a sea-change year for marijuana. Thanks to Obama, the recession and the explosion of cannabis clubs across the state, legislators are now more willing than ever to go where no politician has gone before. San Francisco Democratic Assemblyman Tom Ammiano has even introduced a bill to legalize pot for adults over 18.

It hasn’t been easy keeping up with the times, and here in Sacramento, officials are years behind when it comes to following the state’s existing medical-marijuana laws. All that may become moot if marijuana is fully legalized. Lee’s confident it will come to pass.

“It’s not a total lock, but it’s doable,” he says.

Lee’s downtown neighborhood, “Oaksterdam”—a portmanteau of Oakland and the Netherlands’ capital—is an example of what regulated, taxed and controlled cannabis can look like. Medical-marijuana collectives, pot-friendly coffeehouses, a weed university complete with a student center and store—Lee’s helped transform Oakland’s blighted, crime-riddled downtown into a unique hub that feeds the city treasury’s coffers to the tune of almost $1 million a year.

This July, Oakland became the first city in America to place a special tax on cannabis sales, which could rake in another $1 million annually. And that’s just the beginning. Number crunchers predict that legalizing marijuana could bring in $2 billion annually statewide. At least. That figure caught the attention of Gov. Arnold Schwarzenegger, who stated in May that it’s “time for a debate” on the subject.

Here in Sacramento, the number and unprecedented popularity of dispensaries recently caught City Hall with its pants down, forcing officials to scramble to control a multimillion-dollar industry that exploded under its nose—an industry they still deem “illegal.”

But Californians have made up their minds. They love their pot, and legalization almost seems inevitable.

A little background: In 1996, some 5,382,915 voters took a first step and decided to legalize medical marijuana. The Compassionate Use Act, or Proposition 215, a controversial ballot measure that allowed patients with a doctor’s recommendation to possess and cultivate medical marijuana for personal use, passed with more than 55 percent of the vote.

But the law had loose ends: Could patients form co-ops, or collectives, where cultivated marijuana could be sold? How much marijuana is enough for one person? Who determines said amount: the state, the county, the city, doctors or patients?

It took California eight years to come up with answers to those questions, but finally, in 2004, the Legislature passed the Medical Marijuana Program Act, or Senate Bill 420. Among its many provisions, the law provided counties guidelines for how much cannabis a patient could grow or possess, and also required counties to implement a voluntary identification-card program to protect both patients and caregivers from arrest.

The law also gave patients and caregivers the right to lawfully form collectives, or cannabis dispensaries, which the state requires cities to regulate. Today, there are more than 40 such medical collectives in the Sacramento area, potentially serving 100,000 patients.

The collectives operate in a regulation-free netherworld, but still pay taxes. According to the California State Board of Equalization, statewide medical-marijuana outlets paid more than $18 million in taxes in 2007, and has likely increased since then.

In spite of all this, lawmakers and authorities continue to reject medical marijuana’s legitimacy. Is it that Sacramento can’t keep up—or is the city dragging its feet on purpose?

Federal flip-flop

“When I first got started here in Sacramento, people were walking in saying they had confrontations with police,” said Lanette Davies, recalling medical marijuana’s early days in the state capital. Davies operates Canna Care, a dispensary in north Sacramento, and is also the Sacramento coordinator for Americans for Safe Access, a member-based organization of patients, doctors, scientists and activists who promote secure and lawful cannabis use.

To be sure, access to legal medical marijuana has been anything but safe during the past decade. Medical cannabis remains illegal under federal law, a fact hammered home by frequent Drug Enforcement Administration raids on collectives.

Under the Bush administration, the DEA raided more than 50 medical-cannabis clubs in 2007 alone, in many cases seizing assets and shutting down rightful tax-paying businesses.

One technique the feds used here in Sacramento, asset forfeiture, involved the DEA notifying landlords with dispensaries as tenants that they could seize their property as complicit in a drug offense; many area landlords received DEA letters in 2007.

The feds also have charged hundreds of people in California with medical-cannabis-related crimes in the past 13 years. SN&R has reported on many of those accused, including Cool residents Mollie Fry and her husband, Dale Schafer (see “Cali-nullification” by Cosmo Garvin; SN&R News; August 23, 2007).

Fry, a cancer survivor, and her husband were caregivers, cultivating marijuana for patients and also for Fry’s own medicinal use. In 2001, DEA officers showed up at their home, arresting the couple and carting away patient records and 34 cannabis plants. It took years for a grand jury to indict the husband and wife, but in 2007 the couple finally went to trial. A year later, a federal judge sentenced Fry and Schafer to five years in prison; the couple currently is free on bail as the case waits to be heard in the 9th U.S. Circuit Court of Appeals.

Many local dispensaries also have been raided by the feds, mostly on the Bush administration’s watch.

The most notable local DEA raid was on the River City Patient Center in 2007, then located on El Camino Boulevard near Interstate 80. At that time, the club had been in operation for almost three years—pretty much since the implementation of S.B. 420—and, according to owner Bill Pearce, already had paid nearly $750,000 in taxes to the Board of Equalization and $250,000 to the Internal Revenue Service. But the DEA shut River City down anyway.

Bush left office in January, but the future of federal medical-marijuana policy remains in limbo, thanks to the Obama administrations waffling on the issue.

“Of course I inhaled,” Obama admitted on the campaign trail. “That was the point.” He promised that as president, he would end DEA raids on cannabis dispensaries, much to the delight of the state’s medical-marijuana patients.

San Francisco Assemblyman Tom Ammiano’s bill would legalize marijuana and give California the power to regulate and tax the drug at a state level.

Photo By nick miller

However, when four Southern California dispensaries were raided in January, after Obama’s inauguration, medical-marijuana advocates cried foul. So, on March 18, the administration trotted out U.S. Attorney General Eric H. Holder Jr. to explain that the DEA had been ordered to cease the raids, seemingly upholding Obama’s campaign promise.

Yet in July, Obama’s drug czar, Gil Kerlikowske—whose appointment was celebrated by medical-marijuana advocates for his supposed liberal views on the topic—announced in Fresno that “Marijuana is dangerous and has no medicinal benefit.” It wasn’t just a step backward. The drug czar’s pronouncement literally flies in the face of Proposition 215.

The feds, though, aren’t the only ones finding it difficult to cope with this paradigm shift: Sacramento officials also have a longstanding track record of rejecting the state’s marijuana laws.

Confusion in the city

Sacramento ASA coordinator Davies has witnessed firsthand the city and county’s disregard for medical marijuana’s legal standing. At one point during the past five years, she remembers county officials actually telling her, “The sheriff doesn’t talk to people like you.”

For years, the Sacramento County Board of Supervisors refused to approve the state-mandated medical-marijuana ID program. Advocates and patients appeared before the supervisors twice to persuade them to implement the rule and failed both times. The third time was the charm, and the program was finally approved last December, by a vote of 4-1.

However, although the county is now on board, the city continues to drag its feet.

Obama’s election stimulated an unprecedented expansion of area dispensaries, the number of which nearly doubled during the first half of this year, according to longstanding club owners.

According to Assistant City Manager Gus Vina, the sudden explosion of clubs caused the Sacramento County district attorney’s office to request that city officials begin formulating a regulatory ordinance for the dispensaries—something the city should have undertaken five years earlier upon the passage of S.B. 420.

As one city council staffer put it, this “caused the city to take its head out of the sand, which is where it had been.”

According to Councilwoman Sandy Sheedy’s district director Joann Cummins, the extent of the city’s engagement with medical marijuana up until then was that “Robbie Waters would look through SN&R for the [dispensary] ads, then call the DEA.”

Waters did not return calls to comment by deadline; the council member now supports medical marijuana.

In late May, city council referred the matter to committee for investigation. On July 14, the committee recommended enacting a 45-day moratorium on any new dispensaries, which the council approved.

“We’re in research mode,” explained Vina, who’s been charged by the mayor with reaching out to the dispensary stakeholders and drafting an ordinance.

In the meantime, the city still won’t recognize medical-marijuana dispensaries as legitimate businesses.

“Everything that’s here now is still illegal,” Sheedy said last week, arguing that a catch-all loophole in city code—which states that if a business’ use is not specifically permitted under code, it’s by default banned—prohibits city cannabis dispensaries.

As Vina put it, “It’s tricky, because how do you put a moratorium on something that’s illegal?”

“Nobody has a business license to operate,” she added.

But whose fault it this?

“These cities that are enacting bans [moratoriums] in my opinion are violating state law,” argues Aaron Smith, California director for the Marijuana Policy Project, an advocate group. He cited S.B. 420, which “specifically allows for monetary reimbursement for marijuana and collective cultivation.” Smith says it’s up to the city council to come up with an ordinance, as required by law, not ban legitimate tax-paying businesses.

Sheedy said she views dispensaries as “backdoor, industrial-area businesses,” and that any cannabis-club regulations likely will have the look and feel of the city’s recent payday loans ordinance. She also said the city is looking at Malibu’s medical-marijuana ordinance as a model.

Malibu’s law has sharp teeth: With a population less than 20,000, it only permits three dispensaries, enforces tough land-use restrictions and, this past June, actually denied one of the city’s two grandfathered dispensaries, Green Angel Collective, a permit to continue business operations.

ASA representative Davies also supports the Malibu model.

Vina conceded that the city is in the “very beginning” phase and is actively moving forward to develop fair and informed regulations. He explained that dispensaries recently were given 30 days to register with the city if they wanted to operate as a legitimate cannabis club. Forty dispensaries signed up—a number that Vina called “surprising,” since he’d anticipated “half as many.” (See “Marijuana map,” page 30.)

He also explained that the city likely will extend its moratorium for six to nine more months in September, with the goal of reaching out to stakeholders and introducing a draft ordinance by the end of October.

Until then, medical-cannabis dispensaries will continue doing business as usual—and will pay city taxes. But they will do this illegally in the eyes of the city—even 13 years after Proposition 215.

Pols go to pot

Tom Ammiano relaxes in a leather chair, his pink tie looking like a Mondrian painting gone wild in this otherwise very sophisticated Capitol office. The freshman Assembly member made national headlines when he introduced a bill this year that would legalize all forms of marijuana, adult and medicinal, in California.

“It will be sooner than we thought,” Ammiano says of the legalization, Assembly Bill 390, which is on a two-year track. “There’s a seduction to [legalizing marijuana] now, because there is a monetary advantage. That’s all we can talk about here: our budgetary crisis. So it’s kind of a perfect storm.”

New Jersey resident Louis Santiago (left) and David Rodrigues, from Boston, traveled across the country (Rodrigues drove) to attend weekend courses at Richard Lee’s Oaksterdam University, shown here on Broadway and 19th Street in downtown Oakland.

Photo By nick miller

Unlike most pols, Ammiano actually knows what he’s talking about when it comes to cannabis. He jokes about the drug’s pop-culture ubiquity, laughing at former NBA player Stephon Marbury’s bizarre cannabis confession earlier this month, but also notes that such figures as the late economist Milton Friedman supported marijuana deregulation.

The former San Francisco supervisor has firsthand history with medical marijuana. His partner used cannabis to help alleviate the nausea caused by AIDS. Ammiano thinks marijuana will eventually become a state’s rights issue—“and California will be way ahead of the curve.”

Kind of like Richard Lee in Oakland.

Wearing Easton batting gloves to better helm his wheelchair, Lee rolls down Broadway on the 19th Street crosswalk. “I’m going to have to shave probably,” he laughs; later that day, at 4:20 p.m., Fox Business News will interview the entrepreneur on cable TV.

While Sacramento officials still debate the legality and function of medical-cannabis dispensaries, Lee’s transformed pot into a bona fide boon industry.

“Potentially, it could be $10 [million] to $20 million [a year],” Lee says of the prospective tax influx Oakland would see if his 2010 initiative passes. “And then there’s the indirect taxes,” he notes: rental cars, meal, hotels and visitors traveling across the country to take his Oaksterdam University courses.

“I grew pot for a long time and have been doing this for a long time,” he begins, peering through his dark aviator glasses. “I designed all these classes—except for the marijuana cooking. I don’t know anything about cooking.”

Lee’s two-year-old cannabis-industry college teaches everything from horticulture to history to how to finagle out of a legal snafu if vigilante cops sniff out your cultivation operation. The latter course may be dropped if his initiative goes all the way.

Specifically, the “Regulate, Control and Tax Cannabis Act of 2010” would give cities and counties a choice to legalize and regulate the cultivation, processing, transportation, distribution and sale of marijuana, just like alcohol. Lee, who says the initiative has more than $1 million in its war chest, will have the 434,000 required signatures by Christmas. He’s confident the initiative will make the 2010 ballot.

A young black woman stops Lee at the street corner. “Can I shake your hand?” she asks. “Thank you so much for everything.”

Lee humbly smiles.

He leads the way east down Broadway and stops in front of a building that looks just like one of the many blighted storefronts at K Street Mall. Except this building has been reclaimed and now houses Oaksterdam University Student Union. Alumni pennants and even an Oaksterdam cheerleader outfit adorn its window display.

Inside are pool tables, a shuffleboard, posters of famous cannabis users like Al Gore and Schwarzenegger, bongs, Volcano vaporizers, ashtrays, tables, Christmas lights and even a students-only pot dispensary in the back.

“You play pool?” Lee asks.


“You smoke? Or is that a journalistic conflict of interest?”


Lee pulls up to a square table and opens his black suitcase, revealing a velvet bag filled with marijuana. He rolls a joint, thick and tight. Two other students come over to the table: David Rodrigues, a mid-20s Boston Red Sox fan who drove across the country from Massachusetts to take Lee’s horticulture class; and Louis Santiago, a New Jersey cannabis advocate.

“I just want to say thank you and tell you how excited I am to take this knowledge back home and show people how it’s done,” Rodrigues tells Lee, who again smiles.

Later, Lee explains that he’s also opened university branches in the East Bay, Los Angeles and Michigan.

“Thirteen medical-marijuana states and our government still hasn’t changed,” he says. “It’s a joke, right? Federal prohibition—it’s going to fall eventually.”

Back at the Capitol, Ammiano also is optimistic.

“Gov. Schwarzenegger made his little lame-ass attempt to say we should discuss it. Candidates are disappointing—but they always are. You have to lower the bar with them. This is a public policy issue. And I think it’s worthy of discussion here.”

Ammiano is confident A.B. 390 eventually will pass.

Locally, however, legalization isn’t even on the radar.

“I’m not going into the legalization,” Sheedy said. “I’m just interested in medicinal.”

She may be dealing with legalization quicker than she thinks. Marijuana’s momentum is building, tax revenues are falling and taxing marijuana may prove irresistible to cash-strapped politicians. That’s just fine by the MPP’s Smith.

“I think the fact that things have moved along so quickly is pleasantly surprising,” he said. “I think we’ve known for a long time that marijuana prohibition is on the way out.”