Bay Area Pot Economy Could Grow

Photo: Austin Gates bags a marijuana plant at Harborside Health Center in Oakland, where a new law could allow for an increase in scale of production.
Skyler Reid/Staff
Austin Gates bags a marijuana plant at Harborside Health Center in Oakland, where a new law could allow for an increase in scale of production.

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Taxing cannabis in Berkeley and Oakland

News Editor Javier Panzar talks to reporter Gianna Albaum about the proposed taxes for cannabis in Oakland and Berkeley.

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Oakland's new medical marijuana ordinance permitting four "large-scale" growing facilities could be a game-changer for Bay Area cannabis cultivators as the new businesses' economies of scale could allow them to drastically increase production and lower the price of certain strains of cannabis.

Berkeley growers hoping to take advantage of Berkeley's ballot measure authorizing six permitted growing locations - capped at 30,000 square feet each - will now have to take into account competition with Oakland's four facilities, which have no size limit.

While some growers fear the proposal will run small cultivators out of business, others argue that it will encourage smaller growers to cultivate exotic strains of cannabis or cater to those willing to pay a higher price for local, organic, high-quality pot.

Though there is no specified size range in the text of the resolution, a city report regarding Oakland's cannabis community said proposals were expected to range from 20,000 to 200,000 square feet per site.

Oakland's proposal has few substantial guidelines for the facilities because, unlike Berkeley, Oakland is only required to place the taxation portions of the proposal before voters in the November election.

With proposals already on the table for facilities exceeding 100,000 square feet and city reports estimating Bay Area demand would require 175,000 square feet of space, Oakland could easily provide cannabis exceeding total Bay Area demand.

Ryan "Indigo" Warman, academic adviser to GroPech, a start-up company that plans to apply for one of the four Oakland permits, said the company is not only open to supplying dispensaries across the Bay Area, but also across the state.

"We're planning on starting small and scaling up," Warman said, referring to the company's intent to occupy a 50,000-square-foot building.

Warman said while large-scale operations may lower market prices, they will not bankrupt small growers.

"There's concern within the community," he said. "I think there will be some fluctuation in the marketplace, and I don't think it's going to be as bad as everyone thinks."

Steve DeAngelo, executive director of Oakland dispensary Harborside Health Center, said industrial growers may be limited in their cultivation to certain strains that do not require the expertise of an experienced grower, which could create a space in the market for smaller growers.

"What you're going to see is that the market is going to become more segmented and more differentiated," he said. "It's really important that ... we make room for master gardeners."

He added that the center carries a wide variety of strains to meet the needs of different patients.

Though Oakland's dispensary sales' rose 40 percent last year, according to the city report, DeAngelo said the city should not expect the trend to continue.

"All dispensaries that I know of have seen falling sales or sales are leveling off," he said. "More and more jurisdictions are allowing dispensaries to open up and the available pool of medical cannabis patients is being split."

Ada Chan, policy analyst for Oakland City Councilmember Rebecca Kaplan, said that city requirements for the facilities will likely be decided before the November election, adding there would be an emphasis on health and safety standards.

The Berkeley City Council has already said it will require growers to adhere to certain environmental standards, such as growing organically or providing energy offsets, potentially raising costs for growers.

"Any one or more of those requirements could have impacts on what the prices will be," said Berkeley City Councilmember Kriss Worthington. "It's a question of how much are you concerned about the social responsibility of each component and how much you're concerned about the price."

Previously, neither city had legally allowed for any commercial cultivation. Berkeley's residential cultivation cap was a maximum of 200 square feet, while Oakland's was a maximum of 96 square feet. Despite these guidelines, dispensaries in both cities were providing patients with thousands of pounds of medical cannabis.

Oakland's dispensaries, for example, provided 6,000 pounds of cannabis to patients in 2009. Because Oakland precludes commercial cultivation, where the product comes from is a "don't ask, don't tell" situation.

"That is why we've ... taken (regulation) on," Chan said. "Do we want to pretend that there are little elves that show up every night after the cobbler goes to bed and fixes the shoes for him?"


Contact Gianna Albaum at [email protected]

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