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Mercury News

July 28, 2010

Richmond limits number of pot clubs to three, puts tax measure on November ballot

Richmond reversed course Tuesday night, capping the number of medical marijuana dispensaries it will allow at three and reviving tougher regulations it nixed a week ago.

Pot clubs will be restricted to regional commercial districts, which are major shopping hubs such as Hilltop Mall. The police chief will review applications and grant the permits after holding public hearings.

The City Council gave unanimous initial approval to the new regulations Tuesday night. The ordinance will return for final approval Sept. 21, yielding to requests from residents for more time to digest the plan and give feedback.

The council also voted to place a measure on the November ballot for a 5 percent tax on gross sales receipts of marijuana, regardless of whether it's medicinal or recreational use.

The new regulations on dispensaries are a dramatic change from what the council narrowly approved last week, when officials set no limit on the number of pot clubs and allowed them to be in major and smaller commercial areas. Critics feared that would turn Richmond into the region's marijuana headquarters. Mayor Gayle McLaughlin, who was in the majority vote last week, said she changed her mind after the police chief advised that it is better to have a tighter ordinance now that can be loosened later after review, instead of the other way around.

"This is something new and it may need tweaking as we move along," McLaughlin said.

Other big changes include adding parks and community centers to the list of sensitive areas from which a pot club must be at least 500 feet. Patients also cannot purchase more than one ounce a day.

Other provisions will stay the same. Dispensaries must be nonprofit collectives managed by people who pass criminal background checks. They must be least 1,500 feet from high schools and 500 feet from other schools or day care centers.

Eight confirmed dispensaries have opened in Richmond, most within the past year. Officials started seeking court injunctions in March to shut them down, arguing in court documents that they were not a permitted use when they opened. One site closed this month after the city won a court injunction; hearings on the others are pending. One club was evicted by its landlord after the city sent a letter warning of the non-permitted use.

None of these clubs would be grandfathered in under the new law. And because the ordinance restricts collectives to regional commercial areas, about half the existing clubs would not qualify at their current locations. Officials plan to issue a request for qualifications, essentially allowing people to apply and compete for the three permits. The criteria for evaluating the applications has not been crafted yet.

The City Council plans to meet in closed session next week to discuss the pending lawsuits against the existing clubs. Some council members want to let the dispensaries stay open until the city picks the three that will receive permits, so patients can have uninterrupted access to marijuana.

Richmond now joins a flurry of cities in asking voters whether to tax pot clubs. Pot clubs require more attention from police and fire, and should be taxed more heavily than other businesses, said Councilman Tom Butt who proposed the ballot measure for the council's consideration. And if pot clubs are going to operate here, the city might as well collect sales tax from them, he said.

How much revenue the measure would generate depends on how brisk sales are. Marijuana is a multimillion dollar business -- Berkeley's three dispensaries reported $18.5 million in gross receipts this year to the city, which levies an 0.12 percent tax -- meaning revenue for Richmond could be substantial.

Taxing dispensaries is becoming more common. Oakland levies a 1.8 percent tax on medical pot clubs now, and will ask voters this fall whether to increase it to 5 percent on medical dispensaries and 5 percent on cultivation activities. The tax proposal is 10 percent on nonmedical uses, if California voters pass the measure to legalize recreational marijuana use in November.

Berkeley will pose a similar question to its voters. Its November ballot measure proposes a 2.5 percent tax on medical pot clubs, and up to 10 percent on recreational ones if the statewide measure passes.

Richmond is studying whether to license and tax farms that cultivate medical marijuana for local dispensaries. Oakland voted Tuesday morning to allow up to four farming permits limited to industrial areas in West and East Oakland.

Katherine Tam covers Richmond. Follow her at

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