Santa Cruz's reporting rules for pot dispensaries would be state's toughest

April 25, 2010

J.M. Brown, Santa Cruz Sentinel

The City Council on Tuesday could pass the state's strictest financial reporting requirements for medical marijuana dispensaries. Under proposed rules designed to ensure pot shops are behaving as nonprofits, the city's two dispensaries would be required to report sales sorted by zip code and disclose how often the price was discounted. The organizations would also have to report what type of marijuana and other products were sold and grown, as well as release tax statements and information about their governing boards.

Councilmembers Cynthia Mathews and Don Lane have negotiated for weeks with representatives of the two dispensaries, Greenway Compassionate Relief and Santa Cruz Patients Collective, to create rules that raise the level of public scrutiny without making requirements that are too onerous for the small nonprofits to follow. The council members characterized the dispensaries as well managed, saying the new rules are just part of an overall effort to improve medical marijuana use.

Even though the proposed regulations don't require dispensaries to disclose their prices, Lane said the financial monitoring will ensure the nonprofits aren't enriching themselves. Sales tracking will give city leaders an idea of whether the number of dispensaries - restricted to two by the council last month - are enough to meet local demand.

"If there is revenue that exceeds expenses, they have to disclose that," Lane said. "We would be able to see straight-forwardly that no one is making a profit."

Don Duncan, the California director for the national advocacy group Americans for Safe Access, said Santa Cruz's proposed reporting rules are the toughest in the state. He consulted with city officials on the draft rules, but said he wishes the final version contained fewer mandates. "This is the only ordinance in the state that requires that level of detail," Duncan said. "They want accountability and transparency, but it would seem that a simpler process would be more desirable."

Mathews said the draft ordinance is simpler than what was first considered. A state income tax return will provide a lot of the required information, including annual revenue figures and the salaries of directors. But Mathews said the additional sales data also will help the city - widely known for its compassionate stance on pot use - better understand the inner workings of dispensaries, which have been the subject of some public speculation.

"They'll give us a more organized snapshot of the services," she said.

Scott Wade, spokesman for Greenway Compassionate Relief, said there is no hidden profit to reveal and that the proposed ordinance is "a good compromise" with the city. But, he said, "It's going to take a huge amount of time to put together these statistics."

The increased regulation of pot shops began last year after two applicants requested permits from the city to open new dispensaries. One later dropped out, but the council passed a temporary ban while city staff studied whether there was a need for another dispensary.

On March 23, the council approved recommendations from city planners to limit pot shops to two in non-residential areas, but also to allow them to grow their own product to reduce costs. Some residents said allowing additional dispensaries would increase crime, while supporters said more competition would keep prices down.

While Lane said the new rules don't expressly allow the city to monitor prices, he said making sure the dispensaries are acting as true nonprofits is key.

"If there is no profit, there is no reason for anyone to charge higher prices," he said.

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