Future cloudy for Oakland’s regulation of medical marijuana dispensaries

In the middle of the April 2 federal raid on Oaksterdam University, Oakland City Councilmember Rebecca Kaplan rode up on her bike to a chaotic scene. Dozens of stoned-faced men and women in sunglasses from the Drug Enforcement Agency, Department of the Treasury, and US Marshal’s Office faced off with screaming protesters behind yellow tape outside, as some of the protesters lit up joints.

“There’s a bunch of law enforcement here, they seem to saying there was a crime, we have no information on who they’re claiming is the victim,” Kaplan said to reporters. “If [Oaksterdam founder] Richard Lee and Oaksterdam harmed someone, who are they claiming is harmed?”

While the day remained chaotic — the federal agencies did not announce why they were conducting the raid or what crimes they suspected had been committed—what Kaplan said she did know was that “the regulatory system in Oakland has succeeded.”

Oakland’s dispensary ordinance is well-respected among city officials, including Kaplan, who defended it even in the face of a federal raid. “Oakland’s history of regulating cannabis facilities with strict regulations, with background checks, with zoning rules, with rules about what hours they can operate, how they can operate, has been a success,” Kaplan said. “We have not had crime or violence associated with our dispensaries, and that’s because they are tightly regulated. And so we have not had the problems that other cities have had when it comes to regulation.”

Oakland’s dispensary ordinance, which has been on the books since 2004, is lauded by city officials—a staff report from the City Administrator’s Office published in July, 2011, calls it “a role model for the nation”—and is generally well-respected among local dispensary owners who consider it fair to them and the city. It requires that dispensary operators follow certain rules: sharing annual financial audits and personnel records with the city, making sure there’s proper security and safe access for patients, and making sure clients aren’t a nuisance to the neighborhood.

The ordinance originally permitted four dispensaries to be active in the city, and thanks to a revision of the ordinance in 2011, sometime this year four new dispensaries are scheduled to open, making a total of eight.

But there could be major changes brewing for how Oakland’s dispensaries are regulated. The California State Assembly recently passed Assembly Bill 2312, which would create statewide regulation of medical marijuana dispensaries and would shift regulatory responsibility from the city to the state. Among other stipulations, if approved by the full legislature and the governor, AB 2312 will likely put a cap on the number of dispensaries in a city based on population size, which would limit Oakland to eight, preventing the city from further expanding the limit allowed in its own ordinance if the council ever tries to amend it.

But even getting to those eight isn’t guaranteed. Each of the last four dispensaries to receive city permits has had to struggle in one way or another to open, largely because landlords have been scared off by the threat of another raid by the feds. Earlier this year, landlords who own the buildings where Oakland and Berkeley dispensaries are located received letters from the U.S. Attorney’s Office demanding the dispensaries be closed, either due to tax violations or because they were deemed to be too close to schools.

The California Supreme Court is also hearing cases that could affect how dispensaries are regulated in California, including one case that Oakland City Attorney Barbara Parker said has the potential to “invalidate Oakland’s groundbreaking, model medical cannabis dispensary program” because the court will decide if federal drug laws preempt state law.

With so much up in the air, city officials and dispensary owners aren’t sure what to expect, although they are worried that further limitations on dispensaries could drive the sale of medical marijuana back to the underground market. All they can do, Parker said, is count on the current regulations, and hope that they will remain in place through the legal challenges ahead.

“The City of Oakland has been in the forefront because of the critical nature of this,” Parker said of the city’s approach to regulating dispensaries. “We think it’s critical to provide safe and affordable access, so we’re going to continue doing it, and working with the state and federal government so it can continue.”

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Oakland City Councilmember Rebecca Kaplan stands next to Dale Sky Jones of Oaksterdam during a press conference outside of Oaksterdam during the April 2 federal raid.

Oakland once had as many as 20 dispensaries in the neighborhood that became known as Oaksterdam—the area between 15th andth Streets, Broadway and Webster—before the city’s dispensary ordinance was enacted in 2004. The only rules to follow before that time were state law. Proposition 215, which was passed in 1996, permitted patients with a doctor’s recommendation to possess marijuana, which led to a proliferation of dispensaries offering medical pot for legal sale.

The city’s dispensary ordinance was adopted in 2003, and enacted in 2004. Under the direction of the city council, and after the passage of Measure Z, which mandated that the city tax and regulate marijuana sales, the City Administrator’s Office began conducting hearings on individual dispensaries and issuing business licenses in 2004.

Only four dispensaries made it through that process, and two were closed within the next year, according to Arturo Sanchez, Oakland’s deputy city administrator, who helped craft the ordinance.

That left two dispensaries in the city for about a year and a half—Coffeshop Blue Sky on 17th Street, owned by marijuana legalization pioneer Richard Lee, who also owned Oaksterdam University, and what is now known as Oakland Organics on 7th and Broadway. Two more dispensaries later opened—Purple Heart on 4th Street and Harborside Health Center, in the Embarcadero area. “And for the last six years, those locations have been our permitted dispensaries,” Sanchez said.

Those four permitted dispensaries “have been really good partners with the city,” according Sanchez. “Generally we’ve had a really good relationship with them.”

Everything had gone so well, in fact, that last year the city council voted to double the number of dispensaries in the city, upping the total to eight. (The council ultimately decided not to move forward with a cultivation ordinance, which would have permitted large-scale marijuana farms in the city). The process for applications to fill those last four dispensary slots started in December, 2011, and there were public hearings about which companies to give the four permits to in January 2012.

From an original pool that included hundreds of inquiries, four of the applicants were selected—Oakland Community Partners, Tidewater Patients Group, G8 Medical Alliance, and Agramed. But each has struggled to find a viable site to open, Sanchez said, which has a lot to do with the landlords spooked by the possibility of federal action after the Oaksterdam raid.

There were also some legal stumblingblocks. Regulations from the ordinance forbid a dispensary from operating within 1,000 feet of a school or park.

“When Blue Sky opened, they were one of the few businesses in the downtown area where they opened,” Sanchez said. “A few years later, a school opened up near them, within 1,000 feet. If the school had been there when they had opened, we would have never let them open there.”

The school, a charter high school called Envision Academy of Arts and Technology, was a block away from Blue Sky’s original location. The city allowed Blue Sky to stay at the 17th Street address, and even changed its rules, shrinking the allowed distance from 1,000 feet to 600 feet. That 600-foot rule matched state guidelines for dispensaries from that were issued by the California Attorney General’s office in 2006.

The U.S. Attorney’s office, though, “appears to be” operating under a 1,000-foot rule, Sanchez said, and in October, 2011, Lee’s landlord for the building where Blue Sky was located received a letter from U.S. Attorney Melinda Haag saying that Lee had to be evicted or the landlord would face prosecution.

Lee first moved Blue Sky three doors down and then to 17ht and Broadway. But on April 2, Blue Sky was one of four locations owned by Lee that was raided by federal agents.

On that morning, Salwa Ibrahim, who had been Richard Lee’s executive assistant for about four years, woke up to a string of text messages, most of them telling her not to come into work. “And then I turned on the TV and it was all over the news,” Ibrahim said. “It was a very surreal moment. I couldn’t believe it.”

Ibrahim then rushed to downtown Oakland, and stood in front of Oaksterdam University as the raid was happening to “offer support.”

At that same time, Ibrahim was applying to run her own dispensary—she’s the founder of Oakland Community Partners, the only one of the four new permitted dispensaries to have a location okayed by the city. She planned to open it at 2101 Broadway at 21st Street. She said finding a place to open was the most difficult part of the application, which she said she has been working on for about a year and a half.

“We’re fortunate to be a city with a lot of parks and schools, but that puts restrictions on where our dispensary can be,” she said. “That was the most challenging part of the process.”

Ibrahim now hopes to open by the end of the year, but may have to find a new location. “After the raid at Oaksterdam, that created such an effect with landlords,” she said. “Everyone wants insurance policies, and I don’t blame them. It’s a real threat.”

The other three recently permitted dispensaries have also struggled to open because they have been unable to find the right location, Sanchez said. Still, there will be public hearings this summer for their locations to be approved and all should open by the end of the year, Sanchez said. “If they’re properties are approvable and the financials work out correctly, we should know when they’ll be opening by the end of July,” he said. “Hopefully.”

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A man holds up a joint, moments before lighting it up, in front of Oaksterdam University, in the midst of a federal raid on April 2.

One level of protection that could be coming, Ibrahim hopes, is in the form of a bill currently being debated by the state senate—AB 2312. Authored by Assemblymember Tom Ammiano (D-San Francisco), the bill would “create the first statewide regulatory framework for the medical cannabis industry in California,” according to a press release from Ammiano’s office.

According to a staff member in Ammiano’s office, a “patchwork” of local ordinances hasn’t sufficed, and the state should be aware of who is sanctioned to provide medical marijuana in each local area. If enacted, the bill would establish a Board of Medical Marijuana Enforcement with the California Department of Consumer Affairs to oversee the industry, and also allow local governments to collect a tax on the dispensaries, as Oakland currently does at 5 percent.

Sanchez said AB 2312 would establish guidelines of one dispensary for every 50,000 people, which would cap Oakland at eight. Existing dispensaries with city permits would be adopted into the state program, Sanchez said, keeping them safe from closure by the state. The bill would also give dispensaries protection from the state, and hopefully prevent future federal raids, Ibrahim said.

But, Sanchez said, “That would preempt us and prevent us from [adding more dispensaries]. It would basically be telling cities, ‘You’re not issuing these permits anymore, we are.’”

There are also cases at California’s highest court that could affect Oakland’s dispensary regulations.

After the Oaksterdam raid, Richard Lee ceded control of his marijuana-related businesses while he “decides what to do next,” he said in a recent telephone interview. Still, as a proponent of the legalization of marijuana, he’s been keeping a close eye on a couple of cases before the California Supreme Court that could affect how dispensaries are regulated in California. Two huge issues being debated by the court, he said, are whether cities can ban dispensaries, and whether California jurisdictions should be allowed regulate dispensaries or whether they’re pre-empted by federal law, which states that marijuana is a controlled substance with “no currently accepted medical use in treatment.”

In City of Upland vs. G3 Holistic, Inc., G3 Holistic tried to open a dispensary in Upland, challenging the city’s ban. Lawyers for the dispensary argued that cities can’t ban dispensaries because they’re allowed under Proposition 215, the Compassionate Use Act, which legally allows doctors to prescribe marijuana to patients. A lower court ruled the city was allowed to ban a dispensary, and not be preempted by that state law.

In another case, Pack v. City of Long Beach, the City of Oakland has joined an amicus brief supporting Long Beach. A lower court ruled that federal law, which unlike California state law holds that marijuana is illegal even for medical purposes, preempts the City of Long Beach’s dispensary ordinance. “What’s at stake in this case is much more than just Long Beach’s ordinance,” Oakland City Attorney Barbara Parker wrote in a press release. “If the court prohibits local medical cannabis regulations, it will effectively cut the heart out of the 1996 Compassionate Use Act.”

Lee said these cases, along with AB 2312, “will be important for settling a lot of those issues” about who should regulate dispensaries. “In other parts of the state that don’t have the local support that we have in the Bay Area, it would be important to get access and allow cannabis outlets to operate in local jurisdictions that currently don’t allow it,” he said.

Sanchez said he thinks dispensaries will continue to operate legally in Oakland because of the strong relationship between the city and dispensary owners. He said the city council didn’t have much of a choice back in 2003 but to create rules that would allow dispensaries to operate in the most safe and legal, and the least disruptive, way possible. “We could afford them an opportunity to become as legal as they can, or they would be more inclined for unlawful behavior to continue,” he said. “Thankfully, the dispensaries we’ve selected have been very good partners.”

Parker called keeping dispensaries open in Oakland a “public health and public safety issue” and said Oakland will continue to wage legal battles to make sure there’s “safe and affordable access” to medical marijuana. “The voters of California have spoken resoundingly on how they believe it’s important not to criminalize this type of activity, where people need to alleviate their pain,” she said. “There’s a real concern if there’s a ruling in the state courts that would prevent cities from providing that important regulation.”

But even with the future cloudy, and even though her former boss’s business was raided by the federal government just as she was planning to open her own, Ibrahim said she’s still looking forward to running a dispensary in Oakland. She said city staff has been “wonderful” to work with. “It’s not an easy process, and the City of Oakland has such courage to move forward and realize this is a good thing for Oakland, even as the federal government is swinging in the opposite direction,” Ibrahim said. “They’re standing up.”

Update: On June 25, a hearing on AB 2312 was cancelled at Ammiano’s request, and other publications have reported that sources have told them he is withdrawing the bill. However, the bill’s status is still listed as “active” on the California Legislation Information website and the bill is still listed under “legislation” on Ammiano’s webpage. Oakland North will update this story when we have more information.

You can read Oakland North’s complete coverage of marijuana-related issues in Oakland here.