Pot of gold: Will California resort to high finance?

Saturday, May 29, 2010 – Globe and Mail

SAN FRANCISCO — Pot is in the air here on the shores of San Francisco Bay. Not in the smoke that drifts between the cafés, second-hand shops and indie music stores of legendary Haight-Ashbury. But in the headlines of local newspapers, the posters plastered on phone booths and the ads now airing on the radio.

It has been two months since a proposal to legalize marijuana was added to California’s fall referendum ballot, and the debate on the subject is in full swing. A similar vote crashed and burned in the 1970s, but proponents feel that this time they could win. Last week, councillors across the water made Oakland the state’s first city to formally endorse the move, and the latest polls show public opinion is almost evenly divided.

The proposed legislation is fairly conservative. It would allow growing, selling and consuming cannabis, but local governments could opt out, smoking in public would remain illegal, cultivation would be limited to a small plot and vendors would face severe penalties for selling to anyone under 21.

But a bigger motivation is something profoundly practical: The state needs the cash. Badly.

In the wake of a brutal recession, California is heavily in debt – a $70-billion hole that is making governments at all levels rethink their spending on just about everything.

The proposed law would put a $50-an-ounce tax on all marijuana sales, which translates into an estimated $1.4-billion a year, according to the State Board of Equalization.

“It’s basically the first time it’s been so attractive – because of the economic times,” says Richard Lee, a driving force behind the $1-million campaign to collect more than 530,000 signatures (well over the 433,971 required) to get the issue on the ballot.

He says his desire to legalize marijuana stems from a 1991 carjacking when police took 40 minutes to respond, a delay he attributed to time wasted on less pressing criminal matters.

Three years ago, Mr. Lee, who also runs a marijuana dispensary, helped to create Oaksterdam University, which is named for the Oakland district often compared to Amsterdam and cheekily calls itself “America’s first cannabis college.”

The school teaches aspiring green thumbs the history, politics, economics, legalities and, of course, the horticultural fine points of marijuana. But Mr. Lee also sees it as the birthplace of legal pot in North America. “We have made it a political issue this year … a victory in and of itself,” he says.

“But we do plan on winning. We have labour unions and other groups that never endorsed us before that are coming aboard. … Things are reaching that tipping point.”


There certainly are growing signs of tolerance. Last week, on the same day that Oakland endorsed the proposal, the stately New York Times published a lengthy ode to “haute stoner cuisine” that explored the impact of marijuana on the food scene and, in the process, underscoring how casual use of the drug has become.

Even without the West Coast’s cultural stereotypes, California is a logical choice to make pot legal simply because it already has a thriving marijuana trade.

Since receiving the green light in 1996, the medical use of marijuana has grown into a billion-dollar industry. Los Angeles now has more marijuana dispensaries than public schools – estimated at more than 500, although that number is expected to drop precipitously when more stringent legislation comes into place in June.

Pot is now so prevalent that Oakland city attorney John Russo argued in an opinion piece for a local newspaper last week that anyone trying to enforce the current law is living in a “fairy tale” – and an expensive one at that.

In an interview, he explains that, considering the fiscal pressure on governments and “looking at how much money has gone into the prohibition against marijuana, … I just don’t think we can afford to continue to pretend the so-called war on drugs has any hope of eradicating marijuana use.

“Common sense dictates we start treating marijuana like alcohol: Tax it, license it.”

Others who back the initiative include Jim Gray, a retired Republican judge who wrote a 2001 book entitled Why Our Drug Laws Have Failed and What We Can Do About It, and a former Los Angeles sheriff, Jeff Studdard, who lent his voice to the first radio ad for the Tax Cannabis Campaign.

Even Governor Arnold Schwarzenegger told reporters this month that he doesn’t support the bill personally, but because of “all those ideas of creating extra revenues, I’m always for an open debate on it.

“We ought to study very carefully what other countries are doing that have legalized marijuana. What effect did it have on those countries? Are they happy with the decision?”

Even so, the measure will not pass in November without a fight. The recent poll conducted by the Public Policy Institute of California shows 49 per cent of respondents in favour and 48 per cent against – hardly a commanding lead – and the campaign to raise millions to get out the vote has so far brought in little more than $200,000.

“It’s a deeply flawed initiative. … What were these people smoking when they wrote this?” asks Sacramento lawyer John Lovell, who represents some of the more vehement opponents – the state’s police chiefs and narcotics officers.

He contends that even people in favour in principle will oppose the bill on other grounds, including what he claims is too lax a position on pot in the workplace.

“If I come to work and you smell alcohol on my breath, you can send me home, you can discipline me, you can terminate me,” he says. “If I come to work and my clothing smells of marijuana, I even test positive, I get to go to work that day.”

There’s also the more basic argument of whether it’s wise, from a policy perspective, to make marijuana more easily accessible. Proponents say it’s no worse than alcohol, but many critics (including Canada’s federal government) still consider pot a “gateway drug” that can lead to far more harmful substances.

“I think ordinary people understand it is not a positive social good for people to get high,” Mr. Lovell says. “Because when they get high, when they get intoxicated, when their five senses are compromised, they make bad decisions.”

Californians also must bear in mind what happened in Alaska, which became the first state to legalize pot in 1975, when it voted to allow possession of a small amount for personal use, only to reverse its decision 15 years later.

Even some of the big players in the state’s medical-marijuana industry oppose legalization, which they fear would drive down prices and disrupt the virtual monopoly they enjoy.

It also would launch a state-wide experiment in behavioural psychology, Berkeley economist Alan Auerbach says. Making the drug cheaper and easier to obtain may well cause usage to skyrocket, whereas taxing it too highly risks creating a black market for contraband pot much like the one for cigarettes.

Enforcement would probably remain a problem, especially if many local governments opt out, but Prof. Auerbach says it wouldn’t be the first time a government has had to find a way to impose a new sin tax. “The world didn’t end when we adopted state lotteries,” he explains.


Looking ahead to November, Mr. Russo, the Oakland solicitor, remains optimistic. “I think California may lead the way on this one,” he says.

If so, it will certainly catch Canada going in the other direction. Ottawa is striving to counter its reputation for lax enforcement by cracking down on illicit drug use, and last week Vancouver’s self-styled “Prince of Pot,” Marc Emery, was finally extradited to the U.S. and jailed for five years after pleading guilty to having shipped marijuana seeds to growers across the border.

Kirk Tousaw, who is his lawyer and executive director of the Beyond Prohibition Foundation, says a positive vote in California would show how to legalize marijuana “in a rational, evidence-based way.”

“It certainly provides further impetus for our position, which is: Cannabis is a commodity that is in great demand on both sides of the border and lots and lots of people use it responsibly.”

Oaksterdam U’s Mr. Lee says he imagines a day when California is a major destination for marijuana tourism, with foreigners spending more on hotels and bike tours of the Golden Gate Bridge than in pot-vending coffee shops.

He says his school is a case in point: It brings in $2-million a year in tuition and “over half of our students now are from out of state. They come into Oakland and they book hotel rooms and buy food while they’re here.”

And what about the pot-smoking and its impact on society?

“It’s already happening,” he concludes.

“It’s not like the world changes that much.”

Anna Mehler Paperny is a Globe and Mail reporter.

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