Maybe you've never been to Lottery Row, that fetid strip on Hayden Island packed with video lottery dens, but it's going to affect where and how you buy pot in Portland.

Portland City Council for the first time this afternoon took up just how Portland would clamp down its incoming marijuana market. But more than standout clauses that have been highlighted in recent days—high application and licensing fees, or limiting pot sellers' hours—the specter of Lottery Row flashed and dinged over the proceedings.

"It’s created a very odious situation," Mayor Charlie Hales said of the Hayden Island district. "Having been once burned we’re now a little shy."

Really what everyone's concerned about is the "saturation" of pot dispensaries in Portland. Community members and politicians don't want marijuana shops popping up on every corner (or in a long string of beleaguered storefronts in the Columbia River). Business owners don't want to be inundated by competition, or for the city to give newcomers an unfair leg up.

The central issue that emerged at this afternoon's hearing arises from the fact there are about to be two kinds of businesses selling weed in Portland: Medical dispensaries and recreational shops.

In new licensing rules the city's considering, medical marijuana dispensaries have to be at least 1,000 feet from one another as the crow flies. Recreational pot shops, a whole other class of license, also have to be 1,000 feet from one another. But nothing in the rules says that medical dispensaries have to be 1,000 feet from pot shops. That's giving the pot industry fits.

For months it's been clear that a whole bunch of medical outfits are going to jump ship when recreational pot comes along. People in the industry say the writing's on the wall—that medical dispensaries will be gone within a few years and everybody will be getting their stuff from recreational stores (the thought is that medical patients may get a discounted rate if that happens).

Medical folks say Portland's proposed rules could throw their plans into jeopardy. They're worried that a recreational shop could open across the street from a medical shop, thereby preventing the medical shop from switching over.

"If they don't (go retail) it spells the end of their business," Don Morse, a dispensary owner and director of the Oregon Cannabis Business Council, told city commissioners. "You're setting up a dynamic that will punish the people who paved the way."

Amy Margolis, an attorney and mover and shaker in the path to legalization, made much the same argument.

"Existing medical dispensaries will not be allowed or able to become recreational dispensaries because a brand new dispensary may get the license first," she said, calling it an "unintended and unfortunate consequence."

It looks like the city's going to fix this. City commissioners signaled they'd like to change the language in the law so that no pot shop—be it medical or recreational—can be 1,000 feet from another. That would mean an existing dispensary is safe from encroachment, but also that marijuana establishments are less dense than they might have been.

Commissioner Dan Saltzman called it an "elegant solution," but of course it's not that simple. For some reason, the Oregon Liquor Control Commission is "does not acknowledge" medical dispensaries, according to Theresa Marchetti, who oversees livability programs at the city's Office of Neighborhood Involvement.

According to Marchetti, that means that if the city denies a license to a marijuana business because it's within 1,000 feet of another, the state might issue its own license anyway, throwing things into confusion.

"Our concern is that we might lose the partnership we have with the state," Marchetti said.

City council mulled this over, and decided it didn't really care. "Our job is to try to make this city livable," Mayor Charlie Hales said. "The result that we want is not doing injury to the folks who are already licensed. Those who are operating legally and properly oughta have a shot at the business."

Not everyone's happy with this compromise. Anthony Johnson, chief petitioner behind the measure that legalized pot last year, argued marijuana shops should be treated like bars and breweries (even though they're more akin to liquor stores).

"You can imagine a time when McMenamin Brothers or Deschutes would not be allowed to enter the industry" if similar rules had existed, Johnson said. "Allow the competition, and allow the cream to rise to the top."

Somewhat surprisingly, the saturation issue got almost every bit of attention today. Only one person raised concerns about the fee schedule the city has devised. Under that system, it would cost would-be pot retailers $3,750 to apply for and receive a city license, and $3,000 a year on top of that. That fee is above and beyond high fees retailers face at the state level, and far, far more than liquor licensees have to pay.

The city says it expects 130 recreational shops, 130 medical shops, and 100 total processors, growers and wholesalers in town, netting $1,062,500 in the near term. That estimate is down from an earlier figure, reported by the Oregonian today, that the license program would snatch up $1.4 million a year.

That revision is pretty interesting—ONI says its fees structure is designed only to recover its costs, but the numbers the Oregonian reported suggested the bureau might make a couple hundred thousand dollars more than it spends every year. In the revised estimate shown to council, ONI chopped the number of businesses it says will want licenses, conveniently bringing anticipated revenue in line with costs.