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Cities and counties tell legislators they're struggling to keep up with the legalized marijuana industry

Customers buy products at a medical marijuana dispensary in San Francisco in April. (Haven Daley / Associated Press)
Customers buy products at a medical marijuana dispensary in San Francisco in April. (Haven Daley / Associated Press)

As state officials scramble to begin licensing marijuana sales by the end of the year, cities and counties have already begun issuing their own permits for medical pot and putting local regulations and taxes in place, officials said Wednesday.

City and county officials throughout California testified during a hearing of the Assembly Local Government Committee and said problems are already cropping up. They include skyrocketing property prices in popular growing areas that are keeping out farms that don't grow pot, large sums of cash handled outside of banks and inadequate staffing that has slowed the process of issuing and enforcing local licenses.

Because marijuana remains illegal under federal law, banks will not handle revenue from sellers, so dispensary operators brought $4.6 million in cash to Sacramento City Hall to pay taxes and fees last year, according to Randi Knott, director of government affairs for the city.

“It is literally folks coming in with duffel bags full of cash,” Knott said.

Humboldt County has issued dozens of growing permits and is processing more than 1,000 applications that have been filed, according to county Supervisor Rex Bohn.

"We’ve made some mistakes," Bohn told a legislative panel. "We are inundated. We are bringing in people left and right to implement this. We want to get a control on it. We want to get it out of the shadows."

Humboldt already has a tracking system that allows the county to follow marijuana from farm to sale.

Yolo County has so far licensed 32 growing operations with rules prohibiting the farms from being within 1,000 feet of schools or becoming a nuisance to neighboring residents, according to John Young, a county agricultural commissioner. The skyrocketing land prices are making it hard for new, conventional farmers to move into parts of the county, he said.

Monterey County has adopted a zoning ordinance keeping medical pot operations out of residential areas, requiring growing to be done indoors, and requiring a permit fee and tax, according to Mary Zeeb, the county treasurer-tax collector.

She said the Sheriff's Department has seen its services strained to keep an eye on marijuana growers, which she said face “high potential for theft and criminal activity.”

Zeeb said taxes are expected to bring the county $22.5 million. But the county has "serious concerns" about the lack of banking to handle the cash, she said.

Arcata City Councilman Mark Wheetley said at one point that 20% of the small college town’s 5,000 residential units had become grow houses for marijuana, so the city had to set limits and step up enforcement.

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