The Monterey Herald….
SALINAS — Monterey County elected officials on Wednesday again cut taxes on cannabis growers while trying to walk a fine line between helping a struggling industry without hurting county revenues during a time of budget deficits.
A glut in production is tanking the price for commercial cannabis in Monterey County and the rest of California, prompting local growers to ask elected officials to modify the way it taxes crops.
The industry has been lucrative for both growers and the county. Last year’s cultivation tax revenue for the county was estimated at just a little more than $19 million. Total production and value for cannabis cultivation during 2020 was calculated at $484.1 million, according to the 2020 Monterey County Ag Report, an increase of $34.4 million from 2019.
But things are changing. Some growers have had to cut production by 50% because of the huge number of wholesale cannabis operations in the state. With that increasing supply and stable demand, there is pressure on prices for local growers.
County business tax levied on cannabis crops is based on the square footage of production space. Different tax rates apply to different types of production — mixed-light, nursery and indoor.
The Board of Supervisors Wednesday opted to reduce mixed-light (artificial and natural) to $2 per square foot and reduce indoor cultivation tax to $3 per square foot. Mixed light had been $3 per square foot and indoor tax had been $7 per square foot. Both taxes had already been lowered earlier this year. The effective date of the new cannabis tax structure is July 1.
Supervisors considered another tax reduction option that would have lowered rates even further. Supervisor Mary Adams championed that option, called Option 3, based on her concern that if the taxes aren’t lowered enough then the county is running the risk of cannabis operations closing entirely.
Supervisor Wendy Root Askew called up the county’s budget picture, noting that the upcoming fiscal year will be experiencing an $18 million deficit and then getting worse the next three years. To cut taxes more than what was outlined in Option 2 would be risking a further loss to county revenue.
Ultimately, supervisors voted 4-1 to accept Option 2 with Adams casting the lone “no” vote.
One grower, Chris Boggs, the co-owner of Wave Rider Nursery in Salinas, told supervisors late last year that prices hovered between $500 and $600 a pound compared with $1,500 at the time in 2020.
“The California cannabis industry is experiencing a market correction like none other,” Boggs wrote in a letter to supervisors and Joann Iwamoto, the county’s cannabis program manager. “The cause of which is up for debate, but over-supply is surely at the heart of it.”
Michelle Hackett, the president of cannabis grower Riverview Farms, told supervisors at the same meeting in October that “the market has tanked” and that fellow growers are asking for the modification “out of necessity, not out of want.” She reminded them that markets are in constant flux and that there will be an upturn again, and with that uptick, growers will be expanding their space along with the fortunes of more county tax revenue.
