A client looks over a product at the Harborside Health Center in Oakland.… (Dan Honda, Bay Area News…)
OAKLAND — A day after federal prosecutors moved to shutter the country's largest medical marijuana dispensary, city leaders and other officials came to the defense of Harborside Health Center, warning of dire economic and social consequences if Oakland's carefully regulated industry is quashed.
"We cannot afford the money, we cannot afford the waste of law enforcement resources, and we cannot afford the loss of jobs that this would entail," City Councilwoman Rebecca Kaplan said Thursday at a news conference as dozens of Harborside Health Center patients stood by.
Co-founded in 2006 by Executive Director Steve DeAngelo, Harborside has in many ways set standards for the medical marijuana industry.
The sleek operation — which has a smaller sister dispensary in San Jose — lab tests its cannabis to assess quality and measure key chemical components; offers acupuncture, pain management and other free wellness services to its thousands of members; and employs more than 125 people.
DeAngelo worked closely with Oakland officials as they crafted one of the nation's strictest regulatory schemes to monitor and tax the industry, and officials say he complies with all local and state laws.
But Melinda Haag, the U.S. attorney for California's Northern District, is now seeking to seize the properties where Harborside operates, alleging its marijuana sales violate federal law and that its size as a "superstore" increases the likelihood that it is in violation of state law. A civil forfeiture action was served Wednesday against Harborside's two landlords.
If the move drives Harborside out of business, a chunk of its $30 million in annual sales would no doubt return to the streets, benefiting dealers who don't lab test their products or work with patients to customize medications, DeAngelo and other advocates said Thursday.
Jason David, father of a 5-year-old boy with Dravet syndrome, a rare form of epilepsy, wept as he recounted his son's positive response to a glycerine-based tincture developed with DeAngelo's help. The tincture uses a strain high in cannabidol, which is not psychoactive.
"He's down from 22 pills a day to four. When I look in his eyes and tell him, 'Give me a kiss,' he can now give me a kiss," David said. "Please, Ms. Haag, have some compassion. Don't let me lose my son."
DeAngelo pledged to "never abandon our patients." Harborside attorney Henry Wykowski added that he is conferring with the property owners and has not decided how to proceed. The landlords are expected to reply to the federal action within 20 days and a hearing has been set for October.
"There is no reason to kick down our door," Wykowski said, and invited federal prosecutors to arrange a visit.
Aside from the effect on patients, Harborside's closure — or failure to find another property if the current forfeiture action moves forward — would deal a direct financial blow to the Bay Area city.
Last year alone, Harborside paid $3.5 million in taxes — $1.1 million of which went to Oakland coffers as a business tax. Additional sales tax and payroll taxes were paid as well.
The business tax represents the bulk of the $1.4 million paid last year by Oakland's four permitted dispensaries combined, among them one associated with medical marijuana pioneer Richard Lee that was shuttered in April after a federal raid and is now regrouping without Lee's participation.
Lee's company, which operated the industry trade school known as Oaksterdam University, dissolved, forcing 45 direct employees off the payroll, cutting their health benefits and eliminating 63 other union jobs in related businesses, said Dale Sky Jones, who now operates the university and is rebuilding its curriculum.
Out-of-towners had flocked to the university's classes, staying at downtown hotels and further spurring the city economy, added Oakland revenue manager Dave McPherson.
McPherson said the business taxes paid by dispensaries make up about 2.5% of the $54 million paid citywide. But that is no small contribution in a city struggling with a shrinking police force and the return to the state of $21 million in redevelopment funds, said City Councilman Ignacio De La Fuente.
"This action will have a long-term impact," he said. "Landlords will be intimidated into not leasing buildings" to dispensaries.
Oakland moved in 2004 to limit dispensaries, and in 2009 became the first city to tax the operations. The City Council recently raised the number of dispensaries from four to eight. Applicants are moving through the permitting process but have had difficulty finding willing landlords, said Deputy City Administrator Arturo Sanchez.
Also coming to the defense of Harborside on Thursday were Rep. Barbara Lee (D-Oakland); State Board of Equalization member Betty Yee, who said her office collects $58 million to $105 million in annual state tax from California dispensaries; and Oakland City Atty. Barbara J. Parker, a former federal prosecutor.
"I strongly oppose federal actions against members of Oakland's business community who are complying with California and Oakland laws and regulations and paying their fair share of taxes," Parker wrote in a statement.