Oakland’s plan for mega-grows basically sucks

July 22, 2010 in Local Regulations

Below are my basic issues with the proposed cultivation ordinance and plans for the city of Oakland. As a person who loves Oakland, it is sad to see them moving further from good policy and implementing their desires for progress through ill-conceived legislation. Oakland is a great city, but the officials pressing this issue forward should think about the ramifications of their decision. Their decisions are based on some flawed principles, including assuming that the cannabis industry will conform to the standards of normal big business practice, assuming that their regulation will protect these large scale producers on their own merit, and assuming that they are somehow within the bounds of State law as it applies to collectives. I welcome a healthy discussion on the matter.
The ISSUES:
  • While the intentions of Rebecca Kaplan and the oakland City Council are admirable and face the reality that there must be some regulation and control on the production side of the industry, they essentially fail to protect any of the established producers who are the backbone of the industry. Instead they have planned to allow for four mega-organizations to produce a crop that will lack the integrity and variety that patients currently depend on.
  • As the last person raided by Federal Drug Enforcement Agents in the City of Oakland, I would urge caution to the council, as these organizations purpose and intent are outside of the bounds of the collective or cooperative standards set forth in California State Law. The council seems to believe the directive from the Obama Administration will protect these organizations simply on the merits that they are licensed and regulated, but the key phrase in the US Attorney General’s memo is “clear and unambiguous compliance with State law.” These organizations will, at best be pushing the bounds of legality, and at worse be unlawful organizations that will be targets of the Federal Government. Their extreme and capitalistic nature alone seem to conflict with the spirit of Prop. 215 and SB420. With the massive plant numbers that are being proposed at these locations, the investors/directors would be held accountable as “Organizers/Leaders of a Criminal Enterprise,” a charge that can result in 20 years in prison.
  • When I was raided in September of 2007 in Oakland the Federal Government’s complaint showed that Oakland Police Department participated in the investigation by performing a traffic stop on two of my employees, who were in turn charged by the Federal Government, where they were forced to admit guilt because there is no medical cannabis defense in Federal court. At the time of the traffic stop Oakland voters had passed Measure Z and made cannabis enforcement the lowest priority. The question I hold to the council is, “If they cannot ensure their own police force is not assisting the Feds in their prosecution of medical cannabis providers, how can they be so sure that Federal policy will protect these four mammoth organizations?”
  • For years patient providers in Oakland have risked their freedom and have lived in fear of the Federal government in order to provide high quality medicines. Many have crafted their skills over many years. Now they are being deemed a danger and a nuisance for their actions. Some thanks for the many people who have literally grew the movement to what it is today. Are they supposed to go get one of these “union” jobs now? Really? I do not remember asking for a job…
  • The council persons sponsoring this legislation claim it is aimed at regulating the supply better and avoiding some of the problems that come from cultivators that are forced to play cat and mouse games do to prohibition. Sometimes these situations result in fires, floods, or disturbances due to their lack of proper oversight and clear rules of operation. This legislation does none of that. Instead of providing framework to standardize and legitimize the existing cultivation infrastructure, they have chosen to create 4 new entities with 4 new sets of problems, and will essentially be 4 large targets. The “illegal” cultivators will still be forced to hide their facilities and some will surely lack security, run afoul of electrical code, and create the same issues that currently exist in Oakland; the ones they claim to be trying to solve. If the intention of the legislation is to regulate cultivation and provide a safe means for producing safe and effective cannabis medicines, then it should do that. Not further push legitimate providers further into the dark.
  • The persons or organizations that seem to have the resources to invest in such a mammoth organization, particularly Jeff Wilcox and Dhar Mann, lack the real experience to even comprehend what goes into providing the high quality and versatile supply of medicine that patients have come to demand. Their attempts to buy industry leaders and lobbyist to do their bidding is all fine and dandy, but when the rubber hits the road and cannabis is coming off the vine a t a record and feverish pace, will they have the talent and knowledge necessary to put out a high quality and desirable product? If the product or the organization is deemed inferior, or if the political aspects of these arrangements become barriers to entry in the market, then there will be a breakdown in the organization and market chaos could ensue to attempt to rescue the huge investment risk. The fee to operate is over $200,000 a year just for the license. Heck. It’s $5000 just to apply, I hear. What small business owner has those type of liquid resources around to even apply for these permits.
  • If the City’s large collectives are granted the permit it will lower the competitive quality of the supply and the collectives will hold a larger oligopoly in the market than already exists at this time. Eventually under these circumstances, the industry will be controlled by a few large organizations and the “McDonald’s of Marijuana” moniker will no longer be just a humorous talking point for the press. While vertical integration has normally benefited industry’s, resulting in lower prices for consumers, this phenomenon does not exist in cannabis distribution, as the limited access points allow for organizations to charge $60-65 per eighth ounce of cannabis, even as the wholesale price has continued to fall with abundance of supply.

As for questions regarding legalizing the existing growers and concerns about residential growing; first off the ordinance proposed ALLOWS for residential growing. 32 square feet for a person and up to three people for a total of 96 square feet per residence, or (3) 4×8 grow trays. This does not change, nor does it provide a safety framework for these smaller personal growers to adhere to. What you may see is people renting extra residences to accommodate the restrictions and still meet the needs of their collective of patients or to feed the demand of the current market. In turn, rental property rates will increase and more low income people will be driven out of Oakland as a result.

But most of the supply currently comes from commercial style, medium size cultivation collectives, usually between 20-50 lights, or roughly 10-25 grow trays. These small organizations normally employ a staff of 2-5 regular staffers and a group of trimmers to hand trim the harvest to ensure quality and attention to detail. These organizations grow different strains or types of marijuana. They grow in different mediums, with different feeding regiments, different environmental conditions, and unique plant maintenance technique that create a market place with a WIDE variety of choice, flavor, effect, and lasting properties for patients to choose from. By homogenizing the industry with these massive grow organizations, quality will go down, as hand trimming, properly curing, and care taking of small batches is much less cumbersome than in a mega facility setting.

Most of these modest organizations operate from smaller warehouse/production areas in a commercial environment. Some do skirt the importance of electrical safety and others downright steal power to avoid detection. Instead of bringing these people into the fold by providing an avenue to upgrade their facilities and apply for a production license to continue their work, the City is virtually voting to extend (and ENHANCE) the quasi-legal status quo. That is unacceptable. My solution would be this. Create an application process that allows for persons or collective organizations to submit their organizational plan, facility design, security standards, operational standards, and other relative information, with a fee to cover the application processing/facility inspection services. I am sure up to 1000 or more people would be interested. Charge a $1000 application fee. This is relative to about 4-6 ounces of medicine at wholesale rates, which is doable by even the most meager organization. The income generated could be upward of $1,000,000,000- plenty to pay staff for the process and have plenty left over for the City coffers. Then instead of the $211,000 fee on 4 mega-facilities, a more reasonable and fair license fee of $2500-$5000 per year could be charged and regulations regarding staffing, safe medicines, and responsible community interaction could be agreed to. Even if only 400 of the 1000 that apply are granted licenses, that is still another $1,000,000 to $2,000,000 per year, which is more than the $800,000+ quick money grab they are proposing now to make it a millionaire only event. The City could develop a code enforcement position that was responsible for ongoing oversight, much like most municipalities already do for bars, liquor stores, or even body shops that paint cars. The notion that overseeing a few hundred well run businesses who have an interest in following the rules strictly to ensure their license is renewed is ludicrous, and frankly lazy. This is an accomplishable process. Hundreds of businesses are overseen by the City every year. Why should some cannabis production areas be such an issue?

The City is attempting to model their process after the process they used to regulate dispensaries, but there is a catch. The two dozen or so dispensing collectives that they regulated down to 4 in 2005 were easy to locate and shut down if they did not comply. They were in the phonebook. They were operating in the open. This is trying to regulate a guerilla market by making it more guerilla than before. Odd approach if you ask me. The truth is that the council people putting this forward do not believe they can get the support to pass it unless they severely limit the amount of licenses available. They have called it a starting point. Well their starting point was 4 dispensaries in 2005 also, and here we are 6 years later still with 4 dispensing collectives, some of which serve 30,000 plus members that wait in long lines for medicines and still pay upwards of $60+ per eighth ounce of high grade medicine. That plan has not really worked in a lot of people’s opinions. I mean it has, but it could work a lot better with a more competitive market. Having large communities nearby like Hayward/San Leandro and entire counties in the Bay, like most of Contra Costa and Solano, with little access does not help either. It is time that cities quit pussyfooting around with what is politically viable and begin setting regulations and accepting that this industry is here to stay. These baby-step regulations do not reflect the competition in other industries and the severe limitations in most cities to single or very few collectives creates no place for real competition. The relative similarity in price structures throughout the industry give almost a cartel-like perception. There is no real competition in the pricing arena. At times there have been in areas where we have seen explosions of collectives like LA in 2007 or so, Sacramento in the last year, and San Jose in the recent past. When a market is flooded with qualified organizations with similar products and service, then what you see is places vying for member retention and loyalty with incentive pricing, patient offers, and extended services to make their organization more desirable. When this does not exist what you find are high prices, lack of special offerings, and just enough services to make  create a perception of goodwill for the press and interested parties.

Another issue for these organizations will be attracting and retaining talented cannabis cultivators. Growing good cannabis is an art form, and not for the faint of heart. Most of the trained industry are independent growers and would not choose to work for “Wilcox Megagrdens” or “Dhar Mann’s Marijuana Multiplex.” These organizations will be led by individuals with zero industry credibility and will have an impossible time finding, training, and maintaining the quality staff that it will take to consistently produce a high quality product free from contaminants that plague cannabis agricultural projects. It would be as if Budweiser, Miller, and Coors were the only person’s licensed to make beers. Imagine the beer market before the Microbrew craze came about. Lack of choice, flavor, quality, and craftsmanship. That is a step backwards for everyone. The cannabis industry is still a “who you know” industry, and who you know because you bought their loyalty will not fly very far in the inner circles of this movement. But I could be wrong. Stranger things have happened:).

I have heard the City’s comments on their plan to set forth separate regulations in the fall for small and medium growers. I don’t believe the hype. If that were the case a section could have been added to this legislation to do so. What is the rush on jamming this through? Ahhh, right…MONEY and getting the HUGE TAX BURDEN being proposed on the November ballot. This has nothing to do with cannabis progress and everything to do with selling out our loyal community for a few bucks. This is the epitome of VOO DOO CANNANOMICS  and what Oakland will see is a number of small to medium growers leaving the City for greener and less bullshit filled pastures. With them will go their rent money, their auxiliary incomes, and their good will for the City. I hope it was worth it.

Oakland deserves better. The cannabis producers who have held up a faltering economy for many years deserve better. The cannabis plant deserves better. Oakland must rethink this flawed measure, but if history tells tales they will press on in haste and we will still be arguing about this for years to come. Way to go, Oaktown. Way to go.