A proposed Santa Ana City Council sponsored ballot initiative to tax and regulate medical marijuana collectives could soon create a situation where, of some 150 shops city officials estimate are selling the drug, only 12 would likely be allowed to continue operating.

That means 12 very lucrative city permits.

Ethics experts say the strict limit – along with another November ballot measure council members are considering that would relax campaign finance restrictions – could result in a windfall of campaign contributions from pot shops and an environment ripe for undue influence.

“It’s just very scarce and probably very lucrative,” said Jessica Levinson, an associate professor at Loyola Law School. “So those two things together certainly give rise to some red flags.”

The measure – which council members are scheduled to consider approving at Tuesday night’s council meeting – is a competitor to a marijuana collectives-backed initiative that leaves dispensaries virtually unregulated, a situation city leaders hope to avoid.

Residents in November could decide whether to pick that ordinance or the city’s alternative, which would allow the shops only in industrial zones and place distance requirements from schools, parks and residential neighborhoods. The planning commission would vote on the permits, with subsequent confirmation votes from the council. 

City officials estimate that with the regulations in place, a maximum of 12 shops can remain open. City leaders hope to recoup over $1 million annually from taxing the collectives, with the revenue going toward increased police enforcement against shops operating illegally.

On the same ballot, residents might also be voting on a city charter amendment eliminating a campaign finance rule that restricts council members from participating in decisions regarding people who have contributed at least $250 to their campaigns in the preceding 12 months.

The rule being considered for elimination also prevents council members from seeking contributions of $250 or more from people impacted by a license, permit or other entitlement within three months of the decision. 

Lifting those two rules – which have been described by council members and the county’s campaign finance watchdog as confusing and cumbersome – means the elected officials could collect up to $1,000 per contributor and still vote on their permits.

City leaders probably won’t consider the campaign finance ballot measure until the first July meeting, according to Councilman David Benavides.

So far, officials have been unable to explain how 12 of the approximately 150 dispensaries would be chosen for permits. Though it’s likely that those deemed to be illegal under state law – such as collectives running for profit operations — would be excluded, as would those shops violating the space requirements.

There are about 56 shops confirmed to be operating illegally, Karen Haluza, interim planning director, wrote in an email to Voice of OC.

“Your question about the permit approval process is a bit premature,” Haluza wrote. “We first need to receive final direction from the City Council on the placement of any competing initiative, then we will need to await the outcome of the election.  Following that, we will create policies and procedures for the new process.”

Benavides, the only council member to oppose drafting the initiative, said he wasn’t sure how the city would vet dispensaries for a permit. He said he didn’t consider campaign contributions when he opposed it.

“Frankly, I think there are a lot of questions that have yet to be answered. That’s one of the reasons I don’t feel comfortable,” Benavides said.

Tracy Westen, CEO of the Los Angels-based Center for Governmental Studies, said that if marijuana dispensaries make campaign contributions to council members, it’s very likely that the money is tied to votes for permits. Though elected officials might also be “leery” about taking money from pot shops, he said.

Westen recommended leaving the $250 contribution restriction in place to keep an appearance of fair dealing.

“I would not be at all surprised if money starts coming in,” Westen said.

With fierce competition on the horizon, Levinson said it “creates a system where it becomes frankly the cost of doing business to give campaign contributions, because most dispensaries will want to hedge their bets and not be left behind by competitors.”

“To play devils advocate, if everyone gives, then it kind of cancels out,” Levinson said. “Having said that, clearly these laws are in place because we’re worried about the more obvious situation of, I gave you a campaign contribution, where’s my license.”

Levinson compared marijuana shop permits to liquor licenses, which also are highly regulated, tough to get and have their own history of corruption in the city.

In 2000, former Councilman Ted Moreno was convicted of taking cash bribes from an undercover FBI informant in exchange for a beer and wine license at a gas station.

Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek

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