Business Update with Mark Lacter

Lacter: LA's ban on medical marijuana dispensaries won't work

KPCC's business analyst Mark Lacter argues that LA's ban on pot shops is problematic.

Steve Julian: Mark, the city of Los Angeles decided to ban medical marijuana dispensaries on Sept. 6. What's the fallout?

Mark Lacter: It certainly will be tough for hundreds of dispensaries in the city of L.A. - many of them operating above board, and many of them doing very good business these past few years. But it doesn't eliminate the medical marijuana business entirely. First off, you can go to cities that don't have any prohibitions - and the list includes West Hollywood, Beverly Hills, Inglewood – as well the unincorporated portions of L.A. County. No doubt some of the dispensary owners in the city of L.A. will try setting up operations in those places. And some of them will try to just stay open in L.A. The City Attorney's Office has sent out warning notifications to over 1,000 business owners that they face a $2,500 fine, but here's the thing: officials don't have an accurate reading of where all the dispensaries are located.

Julian: Surprised?

Lacter: You know, Steve, we learned last week that the city doesn't even have an accurate listing of the number of parking lots in L.A., and dispensaries can be tucked away a lot easier than parking lots. And let's also not forget dispensary owners that have filed suit to prevent the ban from taking effect at all. So no, this ban will have only limited effectiveness, but it will remind everyone that regulation and enforcement is an utter disaster. And for that, we can thank the state legislature, which never enacted effective regulations after voters legalized the use of medical marijuana in 1996.

Julian: Yet, we see widespread public support for legalizing medical marijuana, not just in California...

Lacter: ...but all over the nation, which is why the real answer is to distribute the drug the same way we distribute any drug: using real prescriptions, and filling them at your local CVS or Rite-Aid. The reason that hasn't happened is that the federal government still prohibits all kinds of marijuana, and no major retailer is going to run the risk of violating federal drug laws, despite what the laws in California might say. So, that's the holdup, and no matter what the state courts and city councils and local ballot measures might say, the medical marijuana business will never be legitimatized unless Washington allows it to happen.

Julian: Moving to different kind of retailing: back to school sales. Strong or weak?

Lacter: Well, the season really began in July because so many schools opened so early this year. And it's shaping up to be a pretty good stretch for retailers, what with consumers a little more confident about the economy and the stock market having a pretty good run, and the European debt situation not turning out to be the global crisis some had expected by now. Actually, consumer spending in Los Angeles is within just a few percentage points of where it was when it peaked out before the recession (that's according to the folks at Beacon Economics), and it's expected to reach that level once again either by the end of this year or the first quarter of next year. All of which is a very big deal because so much of the economy is based on consumer spending.

Julian: Are we seeing this in the cargo containers sailing into the ports?

Lacter: The National Retail Federation expects cargo traffic coming into the U.S. this month to be up substantially over last year, which would indicate that the chain stores expect a decent Christmas. There's no big mystery as to why people are spending: going back the past year, job growth in California is running at nearly twice the level of the nation overall. And the housing market is clearly picking up steam. That’s despite nearly 2 million Californians being out of work (many of them for more than a year), and many businesses finding that they produce just as much with fewer employees. What seems to be happening is this disconnect between the folks who are basically holding their own and the ones who clearly aren't. And nobody seems to know how to close up that divide.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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