UPDATED: City Councilmember Pierluigi Oliverio released a memo Tuesday proposing that San Jose adopt an ordinance to regulate and tax the cultivation and sale of medical marijuana at dispensaries in San Jose.

The memo, which the District 6 councilmember will speak about at next Wednesday’s Rules Committee meeting, asks the council to discuss allowing medical cannabis establishments in specifically zoned locations within the city. It also outlines his proposal for the taxation of doctor-prescribed uses of pot, most notably that all tax revenue generated would be earmarked for the police department and street maintenance.

“It has become increasingly clear that the use of cannabis for medical purposes has gained legitimacy in our culture,” Oliverio says in the memo. “It’s important that San Jose establish its own set of guidelines for medical cannabis collectives, since the state and federal governments have already determined the legal parameters for municipalities.

“If San Jose is not proactive and does not establish a set of parameters then we may find ourselves behind the eight ball.”

The proposed ordinance would include a minimum 3 percent “cannabis business tax” and a $10,000 cost for permits, which is higher then other cities that allow medical marijuana. It also puts forward strict zoning regulations for both the cultivation and sale of medical pot and a limit to the number of dispensaries. No on-site consumption would be permitted.

Oliverio says that the issue of medical marijuana struck a personal note for him, and that was his primary driver for presenting the ordinance.

“What really struck it for me was talking to my friends, when they had a relative that was sick and dying, and the doctor said, ‘Well, you should get some marijuana,’ and when they asked ‘Where should I get it?’, and they were like, ‘Oh, you should get your niece, nephew, son or daughter go buy some for you,’” Oliverio says. “That puts people in an uncomfortable position to have to go buy something illegal for a loved one who needs it. At the same time, you’re benefiting organized crime.”

“You’ve got a million people here in San Jose, and there are a certain percentage of those people who have these needs. Me myself, I’m 39 and I’ve had seven friends my age or younger die of cancer,” he says.

Denelle Fedor, Oliverio’s Chief of Staff, pointed out that the councilmember’s proposed ordinance is similar to those adopted by several other cities, with the addition of the higher taxes and use fees.

San Francisco has 30 operating medical marijuana dispensaries, and Oakland has four, while in Los Angeles, more than 500 have sprung up all over the city. A moratorium on pot dispensaries in LA was voided in court last week.

The memo mentions that the City of Oakland passed Measure F this July, raising the tax on “cannabis business” to $18 per $1,000. This is expected to bring in an additional $330,000 of revenue to the city in 2010. Oliverio’s suggests that San Jose follow the policies of these cities so that we don’t continue to lose a huge potential city money generator.

“I recommend that the fine be high for any unlawful use so that the penalty acts as a deterrent,” Oliverio writes. in the memo, suggesting a minimum $1,000 fine for doctors and patients who are caught abusing the ordinance. “Then, and the most important, that in a time of health care crisis, San Jose has the opportunity to [do] its part with allowing the provision of having regulated, legal locations for those who need medical cannabis.”

According to the memo, all taxes, fines and fees associated with the ordinance would go straight to funding San Jose’s police and street maintenance.

“So many times the city can make money, and everything goes into the general fund. There’s no earmark, so everyone has to compete for the same pot of money,” Fedor says. “Street maintenance and the police are always number one and number two, on any survey, district by district. So it’s important to help fund those things that people care about most.”

The city council has gotten several requests from citizen’s wanting to open up medical marijuana facilities recently, Oliverio says. According to him, this new ordinance is all about being pragmatic.

“Look at LA who has 500, and half of those aren’t even licensed. So, you can put your head in the sand, but it’s going to happen,” Oliverio says. “We either do it now and be pragmatic, or we can wait until we have them popping up all over town and popping up where we don’t want them and concentrating. Listen, we spend an inordinate amount of time doing other ordinances, at least this one helps people and it brings in revenue.”

Oliverio’s statement cites the Obama administration’s stance on the use of medical marijuana, 1996’s California Proposition 215, the “Compassionate Use Act,” and 2004’s Senate Bill 420.

Furthermore, attached to the memo are California Attorney General Edmund G. Brown Jr.’s 2008 “Guidelines for the Security and Non-diversion of Marijuana Grown for Medical Use,” and the Deputy Attorney General David W. Ogden’s Oct. 19, 2009 memorandum “Investigations and Prosecutions in States Authorizing the Medical Use of Marijuana.”

What the proposed ordinance comes down to is people, Oliverio says. He expects a supportive response when he delivers it to the Rules Committee on Wednesday.

“People can make jokes when they think about Zig Zags or bongs, but in the end, it’s about that nobody wishing chemotherapy treatment on any of their enemies. It’s such a terrible process to go though, nobody wished for HIV AIDS or multiple sclerosis. And what’s the alternative, pharmaceuticals that are just as, and probably more, destructive then anything else?,” Oliverio says. “I believe that there are a lot of people who believe in the cause of medicinal marijuana that is prescribed by a doctor for those who are in pain, and that is the primary thing.”