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How Recreational Marijuana Will Change Los Angeles

Los Angeles' green rush started 10 years ago, when entrepreneurs opened the doors of hundreds of medical marijuana dispensaries. Not everyone was on board.

Critics and activists decried the invasion of dispensaries into neighborhoods like Eagle Rock and South Carthay, and the city cracked down. In 2007 a moratorium was declared in L.A., and about 135 dispensaries that had registered with the city at the time were ultimately grandfathered in as quasi-legitimate.

That didn't stop a free-for-all explosion of illicit storefronts. Despite 2013's voter-approved Proposition D, which outlawed pot shops while allowing "limited immunity" from prosecution for those 135, state tax officials estimated last year that there were still 935 "active cannabis businesses in the city of Los Angeles," which would be more than the number of legal pot outlets in the entire state of Colorado.

With recreational pot aiming for California's November ballot, a new wave of entrepreneurs has high hopes that the weed business in Los Angeles will explode anew. But some experts point out that the Adult Use of Marijuana Act (AUMA) bases much of its regulation on the Medical Marijuana Regulation and Safety Act (MMRSA), signed by Gov. Jerry Brown in December. That legislation doesn't allow an increase in the number of L.A.'s legal dispensaries.

But those in the business of marijuana are still psyched. Colorado has hogged the spotlight since legal recreational sales began there in 2014. The passage of recreational, or "adult use," in California could restore Los Angeles as the nation's cannabis capital.

"The market's going to go crazy," predicts Chris Lindsey, senior legislative analyst for the Marijuana Policy Project. "You'll get this whole new wave of businesses."

Optimists say that even if the city continues its restrictions on the number of marijuana dispensaries in town, the demand, including the market for pot tourism, will explode. The hurdle of having to fake an ailment so a doctor will write a $40 recommendation would be eliminated under AUMA. While it's highly unlikely that you'd see cannabis neatly packaged at your local drugstore, you'd be able to walk into a dispensary without a doctor's note as long as you're 21 or older.

Lindsey says the number of recreational pot users is 10 times the number of medical marijuana patients. "L.A. is a mighty market," he says.

While Colorado's marijuana retail scene features airy, mall-like retailers that can appear to be like Apple stores for indica, most L.A. shops currently are foreboding fortresses with security guards, buzz-in systems for customers, and a record of being targeted by violent criminals. Where there are drugs and cash, there's a hustler who wants them. Recreational legalization could change that in L.A.

"I think adult use is going to transform the marijuana business tremendously," says Mieke ter Poorten, an attorney who has represented L.A. dispensaries. "For those who have been operating under the law, it could transform their businesses into true retailers."

But tapping into that market won't be as easy as putting some chronic in a glass case and opening your doors.

The adult-use initiative, AUMA, will allow cities like L.A. to continue to ban dispensaries. If City Hall figures out a way to issue permits for the 135 limited-immunity shops in town, or if the Legislature passes an exemption for local permitting, which is in the works, it would still mean that the city would have no more than 135 legal shops, albeit ones that could sell recreational pot to anyone of legal age. If the city's 2013 ban is not extended (AUMA would require the city to revisit its ban), AUMA could allow for more local storefronts, but some say that's unlikely, based on AUMA's language and that of December's Medical Marijuana Regulation and Safety Act.

"I actually see L.A.'s dispensary scene contracting," says Lynne Lyman, state director of the Drug Policy Alliance. "It's going to be harder to get a license."

There are proposals in Sacramento and at City Hall to increase taxes on marijuana retailers, and December's pot regulations will create a state cannabis bureaucracy funded by state weed taxes. Lyman says the funding is likely to finally add teeth to enforcement in Los Angeles. Cops and prosecutors have long complained that they lack resources to close rogue shops. With these proposals, including AUMA, the resources could be around the corner.

"This is going to create a system that's so much more organized, with clear lines that will allow enforcement to happen in a much more effective way," Lyman says. "The [next green] rush will be about who can get their act together."

Indeed, some marijuana businesses are grumbling that the December legislation, along with AUMA, are poised to do little to legitimize what they call "gray-area" businesses, those that have paid taxes but still aren't legal.

With AUMA, "all we're doing is adding to the growing list of un-allowed collectives," says Dale Sky Jones, chair of the Coalition for Cannabis Policy Reform.

Critics also say the new state regulations and AUMA could create too much bureaucracy — a sort of Big Government that would thwart the expected green rush. Sen. Mike McGuire of Sonoma County is proposing a 15 percent state tax on marijuana sales to pay for state-mandated policing and licensing of dispensaries. With local and county sales and marijuana taxes, that could push the tax rate on weed to more than 25 percent in L.A.

And herein lies the green rush's doomsday scenario, one in which taxes are so high that people, content to be immune from arrest with less than an ounce in their pockets, simply take the 25 percent discount and buy from the dealer down the street.

"If they want to be taxing people to the gills, that's just going to encourage a huge black market," says Sarah Armstrong, director of industry affairs for Americans for Safe Access.

"Cities and counties do need to have money for regulation and enforcement," she adds. "But do they need an amazing amount of money? Finding the balance will be difficult."

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