Monday, October 4, 2010
The prospect of legalizing California's $14 billion marijuana industry has many believing the Golden State could find its way out of an economic slump as the marijuana state. Find out who stands to win and lose if the underground pot business goes above-ground.
California Jeff Wilcox sits in an office chair, surrounded by 170,000 square feet of empty warehouse space and tells me we’re sitting in the “first commercial cannabis cultivation facility,” in the United States.
Wilcox is founder and CEO of AgraMed, a marijuana production company based in Oakland, California. For now, this vast warehouse space looks more like empty loft space then potential pot factory. But Wilcox said he’s secured $20 million in investment funds (most of it his own money) to make the transformation over the next five years.
“I approached the city of Oakland with a question. If cannabis was in our community could we legally grow it on a large scale, tax it regulate it, bring in union jobs,” Wilcox said.
Oakland’s city council liked the idea and recently passed legislation allowing large scale medical marijuana cultivation and harvesting.
That city’s decision may be a harbinger for what’s to come as Californians go to the polls next month to decide whether to legalize recreational marijuana state-wide. Proposition 19 allows possession of small amounts of marijuana for personal use, and it gives cities and counties the power to regulate and tax commercial marijuana sales.
Agramed’s business plan includes employing 300 people and producing 58 pounds of marijuana in a single day. That’s 33,000 joints. At today’s street value, that amounts to $330,000 in marijuana.
For now, the pot can only be sold for medicinal purposes and Wilcox’s company would have to operate as a non-profit. But if Proposition 19 passes, and marijuana becomes legal in California – all of that changes.
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“Now if Proposition 19 passes, there is an avenue for profit company,” Wilcox said.
The marijuana trade is estimated to be worth $14 billion in California -- twice the value of the state’s leading agricultural commodity – dairy.
Given the size of the market, the potential for new jobs, and the promise of healthy profits and tax revenue, the prospect of legalizing marijuana in California has many believing the Golden State could find its way out of an economic slump as the marijuana state.
So far, nearly 300 people have expressed interest in applying for licenses to operate marijuana factories in Oakland. That city plans to issue only four permits later this year.
Wilcox hopes he’s gets one of them.
But one marijuana seller’s vision is another marijuana seller’s bad dream.
Enter Dwane Waters.
Waters describes himself as a “consultant…a vendor in what we call the cannabusiness.”
Waters operates his un-licensed marijuana business out of an un-marked second floor office space in Berkeley.
“I can honestly say this much about this industry at this time. There’s a lot of old money that doesn’t want the new money to come in. It’s very political,” Waters said.
In California, a pot grower can harvest an ounce of marijuana at a cost of $20 – and sell it for $400.
That profit margin will likely diminish dramatically if marijuana is mass produced and legal. The Rand Corporation, a national think tank, estimates the price of pot could drop by 80 percent.
And that’s a prospect that doesn’t sit well with Dwane Waters.
“But at this point in time, I hope the initiative doesn’t pass because I need a little more room. And we will be affected by the industrialization and corporatization of this industry. Can you imagine going to Wal-Mart and going to the pharmacy and being able to buy marijuana?
“This is what they are talking about,” Waters said.
Pete Dunbar is Chief of the Pleasant Hill police force in Northern California. He represents the California Police Association as their spokesperson against Proposition 19.
“Marijuana equals money,” Dunbar said.
Dunbar is worried cities may see Proposition 19 as a quick way to make a buck. Government analysts say the proposition could generate more than a billion dollars in revenue for the state.
“ I think the term morally bankrupt is probably an apropos term to think about we’re just thinking about marijuana and money, we’re not thinking about the short term and long term consequences of this. I think it’s very short sided,” Dunbar said.