Marijuana Majesty: California’s Regulation of Recreational Cannabis Culture
In the waning days of 2016, a majority of Californians voted in favor of legalization of marijuana (Cannabis sativa) for recreational use. And while the development of a legal marijuana market can in many places build on existing legal, prescription-based dispensaries and shops, the financial, business, and legal hurdles to widespread cannabis consumerism are still aplenty.
Because of all these new issues relating to legal marijuana, Karima Magazine sought out and sat down with Zac Drivon, attorney and Executive Director at Drivon Consulting Group, who is an expert on the regulation and financial aspects of the up and coming recreational marijuana market in California, especially as it pertains to the Stockton and the greater San Joaquin region.
In this article and excerpt from our interview, the focus is on the economic and legal aspects of cannabis and how these aspects will affect our community over the coming months and years:
What does proactive regulation of the commercial cannabis industry mean for San Joaquin County or any local jurisdiction, for that matter?
The prospective impact will be: One, safe and quality tested cannabis products for medical patients as well as recreational consumers; and two, it will bolster revenue (through taxes) for public safety agencies and local governments and help deal with some of the negative impacts that (those local safety agencies and governments) already may be experiencing given that cannabis is already widely available in the underground market. This means that these local governments are going to be able to take advantage of the enormous economic potential that is California's multi-billion-dollar cannabis industry.
So, let’s delve a bit deeper into those two points. First, you mention that safe access for consumers will be a byproduct of this legalization process. Can you explain what you mean by that?
Well, currently California's medical cannabis market … it is (currently) all private NPO entities dealing with one another, if we're talking about the
“quote-unquote” legitimate cannabis operations. All of these transactions are conducted at arm’s length, with essentially zero regulation of those transactions or the products themselves.
Under the state’s commercial market, all products will have to be certified as lab tested, include appropriate labels for potency levels, and be certified for any types of pesticides or contaminates like microbiological impurities, mold and things of that nature. If the product does not pass muster at the lab testing facility, it will not be allowed to be distributed to retailers. So that means that with the proliferation of legitimate cannabis businesses and legal cannabis products, illegitimate, unsafe cannabis products are going to be marginalized out of the consumer market. So, that is one positive benefit.
That makes sense. Continuing on, you mentioned that legalization of the cannabis market will bolster revenues for local public safety agencies. Do you mind expanding on that point, especially as it pertains to taxes, licensing fees, etcetera?
Sure.
Currently cannabis is a multi-million-dollar industry in the state of California. Now, that market is estimated to grow to 9-15 billion dollars within the next 5 years. So, by regulating and drawing revenue by way of licensing fees and taxes from legitimate operations, you're going to be able to divert those revenues to your local public safety agencies and to local government administrations to be able to use those resources to enforce (marijuana-related) regulations that have been put into place.
In rural areas, poorer counties don't have resources to go out and enforce their bans. They're actually unable to create a broad atmosphere for their cannabis industry members and so you allow the legitimate regulated market to grow. You create a broad tax base with no additional burden to your everyday tax payer. All of these burdens and administration fees, are going to be by the cannabis operations themselves and so you are creating a regulatory structure from which you will be able to draw resources to improve public health and safety based on the product and agriculture model. (this is because) as the state regards it, that is already ever present in our communities and that segues into potential economic benefits to local governments.
The potential benefit to local governments seems to be one of the biggest reasons people voted to legalize marijuana in California. Can you give a specific example of this?
I’ll use the example, on a micro-basis, of one of the facilities that has been permitted in the city of Stockton.
The proponents of that project provided their annual revenue projections and that facility itself is anticipated to generate up to 5.7 million dollars in annual gross revenues and applying the city of Stockton's 5% cannabis business license tax, that one business alone is going to be able to generate around $288,000 of revenue per year for the City of Stockton and that will go to improvement of public health and safety and for the community.
Now, you can multiply that figure by the number of licenses (of course) across different industry sectors such as cultivation, dispensaries, manufacturing facilities from both edibles and concentrates, distribution centers, and lab testing facilities, and the revenue potential from these businesses is enormous.
And for these local governments — especially those located in California, Central Valley such as San Joaquin County — given the relative proximity to other heavily impacted areas of the state with the cannabis industry we carry the potential to serve as a logistics and distribution center of the entire state of California.
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And San Joaquin County is situated in between all of (the Humboldt Country, Mendocino County, and Trinity County, major cannabis growth regions/producers) and is sitting between them and the Los Angeles area, which has around 500 or so (medical cannabis) dispensaries in the largest consumer market in the US. So, given San Joaquin County's position within the state, transportation structure with Interstate 5 and Highway 99, for Stockton the Port...is a potential logistics hub.
Basically, we carry the potential to play a huge role in California's canna industry.