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How much money could California lose due to pot dispensary closures?

Reed Moran smells a variety of marijuana shown to him by President and CEO Sam Humeid (L) of the Perennial Holistic Wellness Center medical marijuana dispensary, which opened in 2006, on July 25, 2012 in Los Angeles, California
Reed Moran smells a variety of marijuana shown to him by President and CEO Sam Humeid (L) of the Perennial Holistic Wellness Center medical marijuana dispensary, which opened in 2006, on July 25, 2012 in Los Angeles, California
David McNew/Getty Images

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Marijuana dispensary advocates gathered enough signatures — 50,000 to be exact — to successfully petition the L.A. City Council to suspend the ban on pot shops in the City. But this is just a temporary stop to the closure of 1,000 dispensaries.

Once the signatures are verified, the City Council has 20 days to decide whether to drop the ban altogether or put it to a vote in the March 5, 2013 election, according to a report in The Huffington Post.

What is the potential impact on California's revenue if the ban does get passed?

Just two days ago the Huffington Post issued the following headline: "Obama’s War on Weed in California: Cannabis Crackdown Has Dire Economic Consequences.” Just how dire are the circumstances? Is marijuana really an under-utilized cash cow in a debt-ridden state?

Over the last few years, with the legalization of medical marijuana and the opening of thousands of dispensaries statewide, California has had the opportunity to test this theory.

The results depend on which side you talk to: millions of dollars in taxes, or rising crime and the bills that come along with policing that crime.

For some, the Obama administration’s recent decision to crack down on California is driving a lucrative business with plenty of legal employees out of state, including out of the city of Los Angeles.

Doug Fine, the author of "Too High to Fail," has done extensive research on the marijuana industry in California, including the so-called emerald triangle — the areas of Mendocino, Humboldt, and Trinity counties. He explains that the revenue dispensaries bring in is a necessity in cash-strapped times.

“Californians statewide should be concerned about this because in a time of fiscal crisis medical, cannabis dispensaries contributed 100 million dollars in taxes last year, that’s statewide,” Fine said. “In Mendocino County ... with just 100 farmers coming above ground and paying taxes raised $600,000 and saved seven deputy Sheriff positions while increasing safety, according to everyone there.”

Fine says he supports taking marijuana off of the controlled substances list and creating a system of regulation and guidelines, pointing out that marijuana is far less detrimental than alcohol. He says he would want to see the plant treated like alcohol and regulated specifically for adult use.

“Americans want [marijuana] and what we learn from alcohol prohibition ... you simply can’t force by law the illegality of something people want,” Fine said. “All that does is create gangsters and criminals, like what we see in violence in Mexico.”

Mark Lacter, a contributing writer to Los Angeles Magazines, explains that the dispensary business already faces many roadblocks: they do not qualify for federal tax breaks despite paying federal taxes and the often can’t find banks willing to do business with them. Dispensaries, despite being a legitimate business and adding to the flow of money within a city are not treated as such.

“This is really a strange kind of business, it’s really a contrivance of business really, if marijuana was treated like a standard drug, you’d be able to buy it at CVS or RiteAid and that would be the end of it,” Lacter explained. “The problem obviously are the federal drug laws, because they expressly prohibit marijuana use even for medicinal purposes.”

If dispensaries were shut down, the city would see hundreds of people newly unemployed and the revenue these 800 or so dispensaries are bringing in — anywhere from one to $2 million each — would no longer be in the system.

The problem facing dispensaries is also a moral, human issue — many believe marijuana is a harmful and addictive drug and do not want to give people easy access to what they see as a dangerous substance.

Others argue it’s a legitimate medicinal plant as well as significantly less harmful than other substances currently allowed — and abused — in our market.

But even if the jury is out on the pros and cons of marijuana use, the city of Los Angeles will have it’s chance to vote on the continued presence of dispensaries.

“The reality is substances of any kind ... can be abused and that’s a healthcare issue that has to be addressed,” Fine said. “The fact is people want to use [marijuana] and … the effect of enforcing and banning and criminalizing a plant that 100 million Americans want is simply to enrich criminal enterprises, cartels.”


How much potential revenue does California really stand to lose?


Mark Lacter, contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com

Doug Fine, author of "Too High to Fail: Cannabis and the New Green Economic Revolution"