MENDOCINO Co., 4/21/22 — With planting season underway, the Mendocino County Board of Supervisors discussed their willingness to overhaul county cannabis taxes and permitting fees Tuesday morning during their first hybrid meeting held in-person since the Covid-19 pandemic began two years ago. The discussion initially appeared as separate proposals to reduce cannabis taxes and create a fallowing program to freeze permitting costs associated with inactive cultivation sites. Ultimately, the board debated both simultaneously as a single agenda item, much to the ire of community members who prepared public comments for both agenda items separately.
“I think our tax rate is just simply too high,” Fifth District Supervisor Ted Williams said in exposition. “If we were to contemplate it today and put it before voters, seeing what a cannabis farm can generate in revenue, I don’t think we would find $5K a year to be a reasonable tax. It’s really out of line with any other form of taxation of similar endeavors.”
The supervisors expressed broad support for relieving county-imposed financial burdens on beleaguered cannabis growers amid challenging market conditions. Many growers are still having difficulty selling last year’s harvest, and have reported significant declines in wholesale prices of more than 50% when compared with spring 2021. Some farms are taking the year off to avoid the expenses of planting and harvest, given the risk of an unprofitable year, and the county is rushing to create a low-cost pathway for licensed, compliant operations to keep their permits current without exposing themselves to unreasonable fees and taxes.
“It is not as simple as trimming and harvesting and then you get paid,” Second District Supervisor Maureen Mulheren said. “It’s not working like that in this market, so there needs to be some kind of opportunity for people to continue to be in the legal market with an understanding that they may not be flush with money all the time.”
Timing is a challenge. The next Board of Supervisors meeting is scheduled for May 3, and the deadline to agendize items for that meeting has already passed, according to county staff. Even if an ordinance is presented at a special meeting later in May, it will still take 30 days to take effect. Unless the county pursues an urgency ordinance, which can be passed immediately upon introduction at a special meeting according to G.C. 36934, the earliest possible time frame for a legislative solution looks like June or possibly July.
The board is also looking at reducing the tax burden for Mendocino County growers on an ongoing basis going forward. Supervisor Williams sponsored a proposal to reduce cannabis business taxes imposed by the county by 50% for the next two years. However, tax compliance is likely to be required for permit renewal. County staff estimate that $6.8 million in applicable cannabis taxes have gone uncollected since the program’s inception, and last year the county never received tax payments from roughly half of permitted cultivators.
“We’ve created a dynamic where the tax is almost optional,” Williams said.
During public comment
Jonathan Michael Katz of the Mendocino Cannabis Alliance (MCA) urged the board not to push growers out of the program. Monique Ramirez, who described herself as a specialty cottage operator from District 3, said she’s counting on equity funding to get her through this year, and wants the county to offer payment plans for legal growers behind on local taxes.
“I have only sold six pounds of flower in the market so far from my 2021 harvest, I am living off savings. Thank god we have chickens,” Ramirez said. “To pay $1,250 when I’ve only made a couple thousand so far is just crazy.”
Former supervisor John McCowen also weighed in, urging the current board to reevaluate aspects of the county’s program in a broader sense.
“What we’re talking about so far is a shrinking pool of current applicants, and unless there is an allowance for expansion, you’re going to see a dwindling amount of tax collected no matter how you slice it,” McCowen said. “To continue to limit cultivation in Mendocino County to less than a quarter acre … with current market conditions, cultivation in Mendocino County is going to be a fraction of what it could be and should be.”
The supervisors acknowledged that any permanent reduction in cannabis taxes will likely come with a reduction in county revenues, and lead to impacts on the programs funded with that money. They asked county staff to come back with specific budget numbers for consideration.
Tuesday’s meeting was the first one open to the public and held in the board’s chambers at 501 Low Gap Road since the Covid-19 pandemic started. Many individuals who spoke during public comment took that opportunity to share questionable information about public health measures related to the pandemic, and several blamed the supervisors personally for the local impacts of the global economic shutdown the pandemic wrought. Going forward, individuals will have the option of watching supervisor’s meetings on YouTube and Facebook, attending via Zoom or attending in person. Individuals present in the board chambers may be asked to observe social distancing protocols.