With adult-use cannabis sales set to kick off in California on Jan. 1, local governments like those in the city of Los Angeles are in a mad rush to get the regulatory kinks worked out.
The latest proposal out of LA City Hall, introduced by Council President Herb Wesson, would outlaw “volatile cannabis manufacturing,” which is currently the predominant form of extracting cannabis into concentrates used for dabbing or making edibles.
Cannabis industry experts told the LA Weekly the proposed ban would rob the city of tax dollars and push a lucrative component of the cannabis industry outside LA city boundaries.
Most concerns around using volatile chemicals for cannabis extraction stem from amateur manufacturers using improper techniques, which can result in flammable gases flooding the extraction space. If sparked, the gas can then ignite and explode.
Amateur cannabis extraction using volatile chemicals is already illegal under state law. The LA measure would ban the practice even by qualified manufacturers.
David Sparer, CEO of Bay Area-based Refined Hydrocarbon Solutions, which makes solvents for cannabis extraction, told the Weekly that licensed cannabis-oil producers are on a different level of safety when it comes to producing the oils.
“It’s perfectly safe when there’s a trained operator using high-quality materials,” said Sparer, who added that the company has been in discussions with city officials about what constitutes safe use. “If the City Council doesn’t allow this to happen in a highly regulated environment, the good players will go to outlying cities and the tax revenue will go with them. And it will still be sold in LA. Those bad players left will continue to blow things up.”
Some analysts have projected that concentrates will make up around 60% of the legal cannabis market in Southern California.
A Local Cannabis Bank?
In more promising news for the industry, Council President Wesson has also proposed setting up a municipal bank to enable businesses in the cannabis industry to open accounts and secure loans.
Limited access to banking services have hamstrung operators and caused headaches at local agencies that often must collect millions of dollars in taxes and fees—in cash. And as the LA Daily News points out, while LA accepts business tax payments in cash, the State Board of Equalization does not.
Cannabis business owners, Wesson wrote in his proposal, “are going to go home tonight and sleep on a mattress that’s worth $2 million” while others “have a million and a half dollars in cash buried in the backyard.”
John Bartholomew, Humboldt County’s treasurer and tax collector, said that wasn’t a figure of speech. “We get lots of cash, and sometimes it has been washed—actually washed—because it had been buried out in the backyard,” he told the LA Times.
“We have to figure out a way to make this industry work,” Wesson wrote.
Wesson is expected to introduce a formal motion for his municipal bank proposal to the City Council’s Budget and Finance Committee.