Los Angeles looks to break up vast illegal pot sales

By MICHAEL R. BLOODMarketsAssociated Press

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FILE - In this Friday, Sept. 7, 2018, file photo, Los Angeles City Attorney Mike Feuer, at podium, and then Police Chief Michel Moore announce that prosecutors have charged more than 500 people with misdemeanors for illegal marijuana operations, at a news conference in Los Angeles. Mayor Eric Garcetti said Wednesday, March 27, 2019, that Los Angeles is considering a major crackdown on illegal marijuana shops that have been bedeviling the city's legal marketplace. The move that could pump tens of millions of dollars into police enforcement comes as legal shops struggle to turn a profit while hundreds of illicit storefronts enjoy brisk sales, thanks to their typically cheaper, tax-free prices. (AP Photo/Brian Melley, File)

Mayor Eric Garcetti said Wednesday that Los Angeles is considering a major crackdown on illegal marijuana shops that have been bedeviling the city's legal marketplace.

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The move that could pump tens of millions of dollars into police enforcement comes as legal shops struggle to turn a profit while hundreds of illicit storefronts enjoy brisk sales, thanks to their typically cheaper, tax-free prices.

The legal shops "can't get undercut every single day by everybody else that's out there," the mayor told reporters at City Hall.

The Democratic mayor in his second term didn't put a precise figure on the spending for the city's upcoming budget, but he estimated it would be a ten-fold increase from the current year.

"It really comes down to how much overtime, how any officers we can have" closing illegal shops, he said.

The proliferation of illicit shops has outraged legal businesses that warn that the illicit shops pose safety and health concerns. Pot sold in state-licensed shops is tested by independent labs.

Legal and illegal shops can sometimes operate in the same neighborhoods, with storefronts that look similar. In the unlicensed storefronts, prices can be 50 percent below the legal marketplace.

Industry officials welcomed the plan. By some estimates, up to 80 percent of the sales in the state still are under the table, snatching profits from legal storefronts.

With so much business going into the illicit market, many legal shops "have been laying off employees and cutting staff, trying to figure out how they can stay open and keep the lights on," said Ruben Honig, executive director of the United Cannabis Business Association, an industry group of licensed operators.

Garcetti said more enforcement money is also needed to break a familiar pattern: Illegal shops that are shut down quickly reopen somewhere else.

"We have to reward the good actors," the mayor said.

California kicked off broad legal pot sales in January 2018, but the state's effort to transform its longstanding illegal and medicinal marijuana markets into a unified, multibillion-dollar industry remains a work in progress.

The rollout of licenses has been slow. Many communities have banned marijuana sales or not created rules for the legal market to operate. A promised state tax windfall has yet to arrive, while businesses complain about hefty state and local tax rates that together can approach 50 percent in some communities.

LA is the largest U.S. city with a legal pot marketplace.