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With Measure M, LA takes first major step toward regulating marijuana

With the passage of Measure M on Tuesday, it's no longer a question of if, but when and how the city of Los Angeles will regulate the marijuana industry.

The measure, proposed by the city council and the mayor's office, sets the stage for further regulation, the first move of its kind for the city since California voters approved Proposition 64 in November.

It ensures that violators of newly established laws will be punished, repeals a limit on medical marijuana dispensaries and sets up a new tax structure for marijuana cultivation, distribution and sales.

"This is a pivotal moment in the history of medical marijuana and it will be for recreational as well," said Virgil Grant, President of the Southern California Coalition, an L.A.-based marijuana advocacy group.

"This is huge for the country," he said. "Everybody is sitting back, looking at what move the number one cannabis producing state and city is going to do. And we're gonna deliver."

The city council has defined its power to regulate

Measure M authorizes the city council to create and adjust the regulations around marijuana. That means that they can amend any part of the act. The only thing that can't be adjusted by the council are the taxes on marijuana businesses, which must be approved by voters per state law.

According to the measure, the city council will hold meetings with the community and stakeholders as they determine how to move forward with regulating marijuana in the city.

There will be taxes

Marijuana-related taxes could end up being quite high. Beginning Jan. 1, 2018, the city will institute a new set of taxes for cannabis businesses, including those that manufacture, distribute and sell marijuana.

For example, the city will charge dispensaries a 10 percent tax on any sale of recreational marijuana and a 5 percent tax on any medical marijuana sale.

It's unclear whether businesses will pass those costs on to consumers. Even if they don't, people who buy recreational pot will be hit with a 24.5 percent tax -- a 15 percent excise sales tax plus the city sales tax of 9.5 percent.

It's unclear how much money recreational pot will bring in for the city.

"They're still doing stakeholder outreach and collecting information," said Patricia Huber, Assistant City Administrative officer. "Until we have that it's hard for us to say 'Oh, we'll get this much from X number of facilities.'"

Enforcement takes center stage

Measure M clarifies that anyone who operates without a city-issued license is in violation of the law and can have his operation's utilities cut off as a result. Violators can also be fined up to $1,000 or imprisoned for six months in county jail for violating other regulations.

Illegal shops have been an issue for years now in L.A. The city has not yet spelled out how it will enforce these laws.

Some shops get priority when applying for licenses

With the passage of Measure M, Proposition D is repealed. Prop. D., passed in 2013, allowed a maximum of 135 medical marijuana dispensaries to operate within city limits. Those shops that had been operating in accordance with the proposition will be given priority when the city issues licenses. This was part of a deal struck between various marijuana advocacy groups and the city.

There's still a lot for the city to figure out

The council has a Sept. 30 deadline to submit new regulatory guidelines.

Here are a few of the things that the council still needs to determine:

  1. Who can qualify to operate a commercial cannabis business.

  2. Where to allow cannabis businesses, and how many to allow in any given area.

  3. What limitations to put on cannabis advertising in the city.

  4. How to address issues of non-compliance.

  5. How to address "historical issues of social equity and social justice" as they relate to the commercialization of cannabis.

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