Measure M’s language, however, calls only for “priority in the processing of applications” for compliant dispensaries.
Measure N’s backers submitted the ballot proposition in October, while the City Council didn’t submit Measure M until the Nov. 9 deadline.
Jerred Kiloh, president of the United Cannabis Business Alliance Trade Association, which spearheaded Measure N, said even though Measure M does not establish a baseline number of licenses, his group now supports it. Having an initiative supported by the City Council with largely similar provisions was more important, he contends.
“We’ve made it pretty clear in all our publications that we support Measure M now,” Kiloh said. “It’s just a matter of people paying attention and reading the ballot summaries. With the demographic voting in this election, which is older and usually more sophisticated, we feel pretty confident there won’t be an issue.”
Measure M’s passage is particularly important because local licenses are required for cannabis businesses to get a state license once that program comes online on Jan. 1. Without both a local and state license, any pot shop, grower, manufacturer, or distributor doing business on that date will be operating illegally, according to Grant.
“It would be devastating to the industry in L.A. if we don’t pass local regulations,” said dispensary operator Grant.
Even if Measure M passes, there still will be issues that need to be worked out.
While regulatory frameworks are in place at the state level and starting to be implemented at the county and city levels, there’s still a lot of uncertainty about the practicalities of how the system will work.
One of the biggest concerns is taxation. The state will levy a 15 percent tax on all marijuana sales as part of Proposition 64, which alone wouldn’t be prohibitive. However, local governments can also implement taxes, such as Measure M’s proposal to charge an additional 5 percent tax on medical pot sales and a 10 percent levy on recreational sales. Add in regular sales tax and suddenly there’s a 30 percent to 35 percent surcharge on marijuana sales in Los Angeles, which could wipe out profits or force consumers to the black market, according to Kiloh.
“The taxation is spread out over all segments of the industry, and it’s getting to the line where it really cuts into profit margins,” he said. “Add in higher business compliance costs to deal with more robust regulations and it becomes hard to operate in that environment.”
On top of the new regulations and high taxes, cannabis businesses can’t access the traditional banking system, which is beholden to Federal Deposit Insurance Corp. regulations that make any money touched by illegal drugs, which marijuana still is at the federal level, subject to money-laundering laws. Colorado and Washington – the first two states to legalize recreational marijuana, have tried to address the issue through a closed-loop compliance tracking system, which has had some success. That’s given a few smaller credit unions and local banks confidence to take cannabis deposits.
California is set to implement a similar tracking model, with State Treasurer John Chiang, a candidate for governor, heading an advisory committee to see how the cannabis banking crisis could be ameliorated. Kiloh, who was on a panel addressing the committee’s working group this month in Los Angeles, said he appreciates the state’s efforts though he doesn’t think much is likely to happen without a change at the national level.
“An overall answer to the banking issue just isn’t there,” Kiloh said. “Federal law and the anti-money-laundering measures can’t be overcome right now.”
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