Oakland welcomes more pot dispensaries MARIJUANA

Chad Gilmore, Patient ID Center store manager, applies UPC codes to mini hookahs for sale at the Patient ID Center on Thursday, January 12, 2012 in Oakland, Calif. Chad Gilmore, Patient ID Center store manager, applies UPC codes to mini hookahs for sale at the Patient ID Center on Thursday, January 12, 2012 in Oakland, Calif. Photo: Lea Suzuki, The Chronicle Photo: Lea Suzuki, The Chronicle Image 1 of / 7 Caption Close Oakland welcomes more pot dispensaries 1 / 7 Back to Gallery

Once again, Oakland is barreling into the pot frontier on its own.

Federal officials have forced the shutdown of more than 200 medical marijuana dispensaries throughout California since fall, and the state Supreme Court agreed last week to hear a case that could throw the industry into chaos - but is that discouraging the city of Oaksterdam?

Hardly.

Oakland officials are planning to issue permits for four new dispensaries in early February, doubling the number the city has already granted. The four existing cannabis shops and other pot businesses bring in about $1 million a year in fees and taxes to the deficit-hammered city, and officials are so eager for the extra cash promised by four new outlets they're practically willing to nail in the shelves themselves.

"Look, there is always the potential for a challenge from the U.S. attorney, but at the same time we have to recognize that this kind of thing (pot sales) is happening illegally anyway - so why shouldn't we manage it and make money from it that can help our city?" said City Councilman Ignacio De La Fuente, who chairs the council's economic development committee.

"We can be naive and avoid the issue," he said. "But the reality is that if we go ahead and issue the permits and make sure they (the dispensaries) are managed well, follow the rules and don't become a nuisance to their neighbors, that is in the public's interest."

Risky time

Oakland's likely expansion comes as federal prosecutors are leaning hard on pot operations to close.

The U.S. attorney in San Francisco, Melinda Haag, and her three counterparts in the state said in October that they would aggressively prosecute many marijuana dispensaries as profit-making criminal enterprises. Since then, three dispensaries in San Francisco, one in Marin County and 50 in the city of Sacramento have closed under pressure, along with about 150 others throughout California.

Last week, the San Francisco Department of Public Health took the extra step of suspending its dispensary-permit program, freezing the number of pot shops in town at 24 while city officials reassess legal issues surrounding dispensaries.

There are now about 1,000 dispensaries in the state, most of which have permits. Those without permits are usually small but still pay local taxes and fees.

Court ruling looms

Haag and her fellow prosecutors said they weren't going after patients and caregivers operating in accordance with a California law allowing marijuana cultivation and sale for medical purposes, although the federal government considers even that use illegal. Her concern, she said, is pot stores that are going beyond medical use or operating near schools or playgrounds.

"People are using the cover of medical marijuana to make extraordinary amounts of money," Haag said in October. "None is immune from action by the federal government."

California tax authorities estimate annual retail sales of medical marijuana at more than $1 billion. The state collects about $100 million a year in taxes on those sales.

Adding to the pressure is the California Supreme Court's decision Wednesday to review a Long Beach case in which an appeals court ruled that local regulations authorizing pot sales are pre-empted by federal law. The high court is expected to take up to a year to issue a decision, and if it upholds the lower court's ruling, medical marijuana will be in legal limbo.

Haag's office declined to comment on the pending dispensary expansion in Oakland. However, with the state's first cannabis university and a widely recognized cannabis-oriented district, Oaksterdam, within its borders, the city is always guaranteed to draw scrutiny.

Oakland's attitude: full steam ahead.

Decision next month

Officials with the city administrator's office conducted several hearings in early January to vet applications for the new dispensaries and whittled them down to 10. City Administrator Deanna Santana will determine the final four and issue permits for them early next month, said Arturo Sanchez, her adviser on public safety who oversaw the hearings.

All 10 finalists are far enough from schools or playgrounds to meet city criteria, he said - which may or may not be compatible with federal interpretation. They are spread throughout the city, unlike three of the existing four, which are in or near Oaksterdam just north of downtown.

East Oakland's Harborside Health Center, the nation's biggest dispensary with 95,000 patients, is the only cannabis shop outside the central area.

Sanchez and his staff ranked the applicants from first to 10th, but "the rankings don't guarantee anybody a permit," he said. "The city reserves the right to step over them in light of other factors. One applicant might seem ideal, but the location may not."

5 percent tax

The city charges a $60,000 fee per dispensary permit, plus a 5 percent annual business tax.

None of the 10 applicants is operating a dispensary in the city now. Among the hopefuls is Jeff Wilcox, a retired builder who proposed a cannabis mega-farm last year that was approved by the city but then scuttled after federal officials warned Oakland against it.

Wilcox, 51, wants to open his Agramed dispensary along the East Oakland waterfront at 1820 Embarcadero. His application lists an anticipated first-year gross revenue goal of more than $6 million.

He said his bid was inspired by his own medicinal use.

"I was a builder for 25 years before I retired, so medical marijuana is not my prime business," said Wilcox, who lives in Lafayette and has used medical cannabis for four years for back pain. "There are easier ways to make money, that's for sure. I'm just another applicant, and I just want to do this to see a better way of regulating and running the medical marijuana business."

Several of those already running cannabis operations say they would welcome newbies to their midst.

Jeff Jones helped create the Oaksterdam district by co-founding the first dispensary there in 1996, and now runs the Patient ID Center on Broadway. He said he'd like to see "five more dispensaries, even 10 more, but I'll accept four more if that's all we can get.

"The sky won't fall with more dispensaries, and in fact they can only do the city good," Jones said. "We (in the marijuana business) are now part of the city's budget, and they are counting on us.

"You get outside of this little mecca of change - Oakland - and things are different," Jones said. "People are going underground because of the federal pressure.

"But here, things are still possible. We'd all much rather stay above board, paying taxes and contributing to society."