65B - BALLOT INITIATIVE MEDICAL MARIJUANA COLLECTIVES

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Medical Marijuana Ballot Initiative June 3, 2014 Page 7 local government may ban medical marijuana collectives, but was less clear on the parameters, if any, for which a municipality can regulate them. Further, the decision in City of Riverside case does not specifically mention local regulation of the cultivation of marijuana. Where and how marijuana is grown may rightly be of great concern to local municipalities. Local governments cannot "permit" or "authorize' any activity that violates federal or state law; in fact, federal and state law pre -empts any such attempt. Accordingly, should a municipality decide to regulate, and not ban, medical marijuana collectives, at least one appellate court (whose opinion has since been de- published due to the City of Long Beach amending its regulations) held in 2011 that a municipality's regulation sanctioning the issuance of "permits" for medical marijuana collectives was not allowed because the scheme crossed the line by authorizing an illegal activity. See Pack v. Superior Court (Cal. App. 2d Dist. 2011) 199 Cal. App. 4th 1070 [de- published]). In other words, a court could find that the City is pre - empted by federal law from regulating medical marijuana collectives because the City cannot "permit" or "authorize" a medical marijuana business and marijuana related activities, which activities are prohibited by federal law (i.e. the Federal Controlled Substance Act). To get around this pre - emption issue, the State of California has merely de- criminalized certain State penalties, but has not, and cannot, permit or authorize any right in violation of federal law. Thus, the law is not clear on the ability of a local government to regulate medical marijuana collectives. Not only will any such regulation need to be crafted in a way so as to avoid any Federal pre - emption issues, it would also require the City to expend resources to ensure that medical marijuana collectives are not operating in violation of the City's regulations and to defend any legal challenges to any such City regulation. Notwithstanding this lack of clarity on whether a municipality can regulate medical marijuana collectives or, if they can, the scope of such power, some local jurisdictions within California have passed such regulations. One example is the City of Los Angeles. Originally, Los Angeles attempted to regulate medical marijuana collectives. However, in 2012 after years of defending numerous lawsuits over the legality of these regulations, the City of Los Angeles repealed its regulations in light of the Pack decision (the City of Long Beach's medical marijuana collective regulations were based on the then - existing regulations from the City of Los Angeles) and instead banned medical marijuana collectives altogether. In doing so, the City of Los Angeles cited the several threats of litigation brought by marijuana advocates should the City of Los Angeles adopt registration provisions for medical marijuana collectives and to the December 2011 opinion of the California Attorney General Kamala Harris that several laws concerning the regulation of medical marijuana were "unclear," particularly the rules for medical marijuana collective operation. Fiscal implications of medical marijuana collectives There are a number of issues regarding the licensing and taxation of medical marijuana collectives /cooperatives that would need to be addressed as part of any ballot initiative proposing to permit, but regulate this type of business. The method proposed as part of the Santa Ana Medical Cannabis Restriction and Limitation Act is to charge collectives a 5 -to -6% gross receipts 65B -7