OAKLAND — A proposal to increase the business tax on Oakland's four medical marijuana dispensaries won the support of a four-member City Council committee Tuesday, and it could be headed for the ballot July 21.

The tax increase is billed as one way to generate a small amount of additional revenue from medical marijuana dispensaries, which require more oversight than typical businesses, for a city facing a deficit that could reach $65 million in the 2009-10 fiscal year.

What remains in dispute is what the new tax rate should be. The council's finance committee Tuesday sent the proposal on to the full council, which could set the proposed tax rate at anywhere from $12 to $24 for every $1,000 in gross receipts.

The dispensaries, which now pay the same business tax as other retail operations, are on board with an increase from the $1.20 per $1,000 in receipts currently paid.

But James Anthony, an attorney for Harborside Health Center, one of the four legally operating dispensaries, said the proposed tax should be no higher than $14 per $1,000 if the city expects support.

"I'm afraid if it goes too high, we will have a patient revolt," he said. "And one thing that medical cannabis activists are good at is winning elections."

Anthony suggested a tax increase to members of the council about a month ago, he said. He said paying a higher tax rate could show the 120 jurisdictions across the state that have banned medical marijuana sales that "medical cannabis dispensaries are good neighbors" that can help provide cities with revenue.


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Richard Lee, owner of the Coffeeshop Blue Sky, had a similar take, but said he would support any tax between $12 and $24 per $1,000, and does not expect a "patient revolt." He said Coffeeshop Blue Sky would take the financial hit, without passing costs on to patients.

The full council will take the item under consideration April 21. If passed by voters, the new tax could generate between $200,000 and $400,000 in additional annual revenue, depending on what rate is proposed.

Councilmember Nancy Nadel (Downtown-West Oakland) joined Councilmember Jean Quan (Montclair-Laurel) on Tuesday in supporting a rate of $14 per $1,000. Councilmember Ignacio De La Fuente (Glenview-Fruitvale) said he will push for $24 per $1,000.

For now, the July 21 ballot includes measures to reduce mandated spending on youth programs, increase the city's Hotel Tax and close a loophole in the city's Real Property Transfer Tax ordinance to ensure transfers of real estate through corporate mergers or acquisitions are taxable.

Quan has also proposed a quarter-cent city sales tax increase, but the idea has drawn opposition from other council members and faces a difficult road to the ballot.

Reach Kelly Rayburn at 510-208-6435.