Bloomberg News

Medical-Marijuana Shops May Pay for Bid to Repeal San Jose Rules

November 07, 2011

Nov. 2 (Bloomberg) -- San Jose, California’s marijuana dispensaries would pay higher taxes to cover the cost of their bid to overturn a new city ordinance regulating the businesses, under a proposal from Mayor Chuck Reed.

To pay for an election to repeal the rules, Reed called for an increase in the city’s tax on the shops to the maximum 10 percent of gross receipts, up from 7 percent currently, according to a memo the mayor released yesterday.

“If we have to have an election, it will cost us $1 million to do it in June,” Reed said in a telephone interview. “I think the industry should pay for it.”

Reed’s proposal coincides with federal efforts to crack down on the shops that sell the drug in the state. The top U.S. prosecutors in California said last month they’re using property seizures and criminal charges to respond to “explosive” growth in the trade.

If the city had to pay for an election on the issue, that “could threaten our ability to preserve the very services voters intended to fund with the marijuana business tax,” Reed said in the memo to the City Council’s Rules and Open Government Committee.

A group called the Citizens Coalition for Patient Care on Oct. 28 turned in almost 48,600 signatures to support a ballot measure repealing an ordinance passed by the council in September. The law, which has been suspended because of the petition drive, sets out rules on who can operate a collective to sell the drug and on how people grow marijuana. A second ordinance limits the number of dispensaries to 10.

Certification Needed

The petitions must be examined and certified to ensure the opponents have the almost 29,700 valid signatures needed to put the issue on the ballot, if the council decides against repeal.

The mayor’s proposal and the signature-gathering efforts likely will be considered at a Jan. 10 council meeting, Reed said.

As of Oct. 28, the city had collected about $2 million in taxes from the industry since it began charging the levy in March, according to an Oct. 31 memo from City Manager Debra Figone. There are more than 105 marijuana collectives in San Jose with business tax certificates, the memo said.

Voters approved the marijuana-business tax last year. If an election isn’t held on the industry’s challenge, the tax rate would return to 7 percent, Reed said in his memo.

California was the first state to legalize marijuana for medical use, in 1996. San Jose is the state’s third-largest city by population, behind Los Angeles and San Diego, according to the U.S. Census Bureau.

--Editors: Ted Bunker, Pete Young

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.


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