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As California embraces legal marijuana, many cities and counties say 'no'

Bags of cannabis await packaging for retail sale through a medical marijuana delivery service in Orange County on Nov. 29, 2018. Advocates for pot regulation say a black market will likely continue to flourish if California cities and counties refuse to provide local business permits.
Bags of cannabis await packaging for retail sale through a medical marijuana delivery service in Orange County on Nov. 29, 2018. Advocates for pot regulation say a black market will likely continue to flourish if California cities and counties refuse to provide local business permits.
Jill Replogle

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It’s mid-morning at the headquarters of a medical marijuana delivery service in south Orange County, and employees are gearing up for orders to start flowing in. A skinny, clean-cut Millennial named Ben packs a smell-proof duffle bag with plastic medicine vials full of dried marijuana buds, packages of cannabis-laced sweets and other products. 

Two other delivery drivers do the same, while a phone operator sets up to start taking orders. 

Justin, 40, runs this 6-year-old business out of a converted bedroom in his two-story, suburban home just off the 5 freeway. He serves medical marijuana patients from Huntington Beach to San Clemente. His client list includes around 5,000 names. 

Justin pays California taxes and has a seller’s permit from the state. But his business operates in a legal gray area or, some believe, fully in the illegal black market, which is why he asked us not to print his full name or that of his company. 

Marijuana is still illegal under the federal Controlled Substances Act. Plus, almost every city in Orange County — including the one from which Justin runs his company — prohibits marijuana businesses, including delivery. 

While California prepares to open the doors to the recreational cannabis industry in 2018, only one of Orange County’s 34 cities, Santa Ana, plans to allow for retail cannabis shops. And no marijuana-related businesses are allowed on unincorporated county land. 

That may seem to fit O.C.’s conservative reputation, but it’s typical of cities and counties across the state, experts say. Jacqueline McGowan, a consultant who has been tracking local cannabis regulations, said 73 percent of cities and counties in California currently ban commercial cannabis businesses. But McGowan said she expects more jurisdictions to approve regulations allowing for them in the coming months. 

Recreational pot shops could be few and far between in OC

Source: OC Public Works and KPCC reporting. Details: Santa Ana will allow up to 13 adult-use retail stores. In Costa Mesa, medical cannabis distribution, manufacturing and R&D will be allowed. Some cities, including Laguna Beach, Laguna Woods and Stanton, allow residents to receive cannabis deliveries. Other cities expressly prohibit deliveries within city limits.

Dustin McDonald, vice president of government relations for Irvine-based Weedmaps, considered the Yelp of the marijuana industry, said many city and county leaders are adopting a “wait and see approach.”

“They've been reluctant to move forward aggressively with organizing any kind of policy reforms out of concerns about how they might impact public health and public safety and what political ramifications there might be for them as elected officials,” McDonald said.  

"Enforcement itself is not an effective tool, ultimately, in combatting the illegal market,” McDonald said. "You really need policy solutions, which is why the state went down this road to begin with.” Still, he thinks local governments should ultimately follow the state’s lead and embrace legal, regulated marijuana. Otherwise businesses like Justin’s delivery service might just go further underground.  

Orange County Sheriff Sandra Hutchens disagrees. She was against legalizing marijuana in California, and she has advised OC cities not to open themselves up to the legal cannabis industry.

"Our biggest concerns are two things: the youth using marijuana more and people getting injured in traffic collisions,” she said.

More than one-third of OC cities pay the sheriff’s department to provide local policing. And Hutchens has warned some of those cities that their law enforcement costs could rise if more marijuana is legally available. 

She said that’s because, for one thing, sheriff’s deputies might have to spend time going to court to testify in DUI cases since there’s no simple DUI test for marijuana. And the department may need to hire more crime analysts. 

"I don't actively go out and go to the city and say, 'I think you should not allow it,’” Hutchens said. "I think it's their decision to make, but when asked, I will tell them the reasons why I don't think they should.”

Patrick Muñoz, a partner at the law firm Rutan & Tucker who represents various Orange County cities on marijuana and other issues, said most of his clients don’t seem interested in permitting marijuana businesses, despite the potential tax income. 

"They're worried that it's a gateway drug," he said. "They're worried about, you know, what's the reality of being able to regulate it, how do you really keep it out of kids’ hands." 

Muñoz has prosecuted about a dozen cases against rogue marijuana businesses in California. He anticipates that enforcing local laws will continue to be difficult once recreational cannabis is fully legal next year. 

But he hopes the state’s new, more robust regulations on cannabis will help. “Come January, presumably we can go to the state and say, ‘Hey, we've got someone illegally operating here, and we want the state to help us.' Whether they will or not will be a whole new question."

Vials of medical marijuana line a desk at the headquarters of a delivery service in south Orange County on Nov. 29, 2017. Come Jan. 1, 2018, Californians will be legally allowed to buy recreational cannabis. But most cities and counties have placed bans on cannabis businesses.
Vials of medical marijuana line a desk at the headquarters of a delivery service in south Orange County on Nov. 29, 2017. Come Jan. 1, 2018, Californians will be legally allowed to buy recreational cannabis. But most cities and counties have placed bans on cannabis businesses.
Jill Replogle

For now, the gray and black markets for cannabis appear to be thriving, despite years of attempts to shut down illegal operators in OC. Weedmaps currently lists 186 delivery services in the county, the vast majority of them operating in violation of local municipal codes. 

Justin’s delivery business fills 30 to 40 orders a day, with a minimum order of $50, and he’s open almost every day of the year. He’s baffled by what he sees as a disconnect between the obvious demand for marijuana and people’s willingness to have an open marketplace for the drug. 

Fifty-two percent of OC voters cast their ballot in favor of Proposition 64 to tax and regulate pot.

“To me, it's strange that people want to use it, they want other people to have the freedom to use it, but they don't want anybody to see it,” the pot entrepreneur said. 

He’s also frustrated that the era of legalized marijuana in California doesn’t seem to have a place for his Orange County business.

"If you're a city councilmember or you're an official and you're elected, I think it would be in your best interest to listen to [the voters],” he said. "You know, I think that's the way the system's supposed to work."

For now, most Orange County residents and cannabis consumers have stayed quiet on the issue. City councils across OC have passed moratoriums with little public input, either for or against, and none of Justin’s customers on the morning I visited would consent to an interview. 

Justin said he plans to continue to operate his delivery business for the foreseeable future. 

“We've all gotten very comfortable with the risks you have to take in this business,” he said.

Orange County vote on Prop 64, Marijuana Legalization Yes No
Aliso Viejo 58% 42%
Anaheim 51% 49%
Brea 48% 52%
Buena Park 50% 50%
Costa Mesa 59% 41%
Cypress 48% 52%
Dana Point 56% 44%
Fountain Valley 48% 52%
Fullerton 51% 49%
Garden Grove 49% 51%
Huntington Beach 55% 45%
Irvine 55% 45%
La Habra 50% 50%
La Palma 43% 57%
Laguna Beach 62% 38%
Laguna Hills 54% 46%
Laguna Niguel 54% 46%
Laguna Woods 49% 51%
Lake Forest 53% 47%
Los Alamitos 54% 46%
Mission Viejo 51% 49%
Newport Beach 53% 47%
Orange 52% 48%
Placentia 47% 53%
Rancho Santa Margarita 52% 48%
San Clemente 53% 47%
San Juan Capistrano 52% 48%
Santa Ana 52% 48%
Seal Beach 52% 48%
Stanton 52% 48%
Tustin 53% 47%
Villa Park 42% 58%
Westminster 47% 53%
Yorba Linda 44% 56%
Unincorporated area 49% 51%
County total 52% 48%

Source: California Secretary of State.

This story is part of KPCC’s 3-day series on the changing attitudes and new laws around recreational pot in California. Find more coverage here.