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Law California

NEWS BRIEF

Another massive bust of illegal marijuana grows in California​

Published 4 hours ago



California law enforcement officials this week announced two days worth of raids at several locations that produced the largest illegal marijuana grow operation in the history of the San Francisco Bay area.

As of Thursday, the Alameda County Sheriff’s Office estimated that deputies had seized roughly 100,000 marijuana plants, 12,000 pounds of cannabis flower, about $10 million in cash and 37.6 tons of plants and materials from at least a dozen sites where search warrants were executed, The (San Jose) Mercury News reported.
The warrants and raids were the result of an 18-month-long investigation, and Alameda County Sheriff Sgt. Ray Kelly predicted the busts – and resulting arrests of several suspects – would have little to no impact on California’s thriving illicit cannabis market.
“There is nothing to stop them from doing it again,” he said. “It’s such a lucrative business.”
The history-making bust is one of several conducted already this year in California.
In June, authorities uncovered another huge unlicensed marijuana grow operation in Los Angeles County that was worth an estimated $1 billion.
Members of California’s legal marijuana market cite the underground market as one of the state’s biggest hurdles to success, but law enforcement officials say their hands are largely tied when it comes to effective crackdown efforts.
Cannabis Industry & Marijuana Business Briefs California Medical Cannabis Business & Marijuana Legal News
 

100,000 Cannabis Plants Seized In Historic San Francisco Bay Area Bust

A two-day raid by law enforcement agents in the Bay Area led to millions of dollars in cash and 100,000 cannabis plants being confiscated.

Law enforcement officials in the San Francisco Bay Area seized more than 100,000 cannabis plants from more than a dozen unlicensed cultivation sites last week, taking down a “modern day bootlegging” operation in a series of raids that spanned two days. The massive bust carried out by the Alameda County Sheriff’s Office across the East Bay resulted in the confiscation of millions of dollars in cash and cannabis plants representing tens of millions in potential illicit marijuana sales, according to law enforcement estimates.

“This is an organization operating outside the law and the protocols of governance of marijuana in California, unsanctioned and making millions in profits,” said Ray Kelly, public information officer for the Alameda County Sheriff’s Office.

Kelly said that the illicit cultivation operations, which he described as “high tech” and “very sophisticated,” were “motivated by extreme profit and greed. It was a pure cash grab by the organizers of this enterprise.” Several suspects have been arrested during the raids, although officials have not released the names of those individuals taken into custody.

18-Month Investigation Led To Bay Area Raids​

More than 100 sheriff’s office personnel and agents with the Alameda County Narcotics Task Force were involved in an 18-month investigation that culminated in last week’s raids, which saw search warrants served at 18 sites in East Oakland, Hayward, Castro Valley and San Leandro. The investigation was begun by narcotics detectives with the sheriff’s department after they received a tip about an illegal marijuana cultivation operation. The raids yielded about six tons of pot as well as Rolex watches and other jewelry.

“We’ve seized 12,000 pounds of processed, harvested marijuana product ready to go to sale,” Kelly said.

At one raided cultivation site in an Oakland warehouse, deputies seized as much as $10 million in cash along with evidence of a money-laundering operation. Kelly noted that the Bay Area cultivators could have avoided police action if it had been licensed by the state.

“What’s crazy about this is had they applied for proper permits and fees and paid all their licenses and tax fees, we wouldn’t be here,” he said at a press conference at the Oakland warehouse on Thursday, where he displayed a bag he said contained $1 million in seized cash. “This is one of the largest grows we’ve ever seen in recent memory. It’s a massive operation.”

“These people are not doing that,” Kelly told Newsweek, referring to gaining the necessary permits to cultivate cannabis legally. “They’re operating similar to 1920s bootlegging operation. They’re very sophisticated, very organized. They’ve invested millions of dollars in their infrastructure. We estimate they have somewhere near half a million square feet of real estate grow space that they use.”

Kelly said that the operators of the illicit cannabis cultivation sites would purchase warehouses and other buildings, outfitting them with sophisticated growing equipment including computers and timers. The suspects would pay plumbers and electricians inder the table to install the equipment, and hired cultivators, trimmers, and transporters to produce and distribute the cannabis.

12 Truckloads of Pot Up In Smoke​

The sheriff’s spokesperson said that 12 tractor-trailer loads of cannabis had been transported to a site in California’s Central Valley to be incinerated. He added that required taxes had not been paid on cannabis sales and that forensic accountants would be involved in the ongoing investigation. In a social media post on Wednesday, the sheriff’s office wrote that it would take several days to process the search warrant sites and haul away the contraband.

“This organized and sophisticated network of individuals were making tens of millions of dollars in profit and avoiding California [marijuana regulations],” the sheriff’s office wroteon Facebook. “We estimate at this time that we have seized over 100,000 plants and upwards of $10,000,000 in cash. In addition, there are millions of dollars in infrastructure, equipment, lighting, generators and supplies used to facilitate the grows.”

Kelly said that at least seven people have been arrested in the operation so far, and more arrests could be forthcoming. In addition to offenses involving illegal marijuana cultivation and money laundering, detectives are investigating if any environmental laws have be broken by the operation.

“The environmental impact that these locations cause is concerning,” he said. “We’re talking about fertilizers, chemicals, chemicals known to cause cancer.”

Despite the arrests and seizures, Kelly said that the potential profits from illicit cannabis are so high he doubted the operation would serve as much of a deterrent.

“There is nothing to stop them from doing it again,” he said. “It’s such a lucrative business.”
 

California ‘burner’ distributor lawsuit underlines why licensed cannabis firms cheat to stay afloat, insiders say​

Published October 6, 2021 | By John Schroyer


Image of money changing hands


When the CEO of a California marijuana retail chain sued the state in September over so-called “burner distribution licenses,” he focused a spotlight on an issue that many in the state’s cannabis industry are loathe to acknowledge:
Many of the state’s licensed marijuana businesses are bending or breaking the rules – and have been since California’s legal adult-use market launched in 2018 – because there’s so little profit to be had by operating lawfully.
That’s an allegation leveled by numerous industry officials. Such activity has been something of an open secret for years, but the “burner distro” lawsuit has given insiders cover to discuss more openly.

“The simple answer on what gave rise to (burner distribution licenses) is: Legal operators are trying to find ways to survive. That’s been made very clear to me over the last several years,” said Adam Spiker, the executive director of the Southern California Coalition, a Los Angeles-based cannabis trade organization.
Spiker said high taxes and the ever-present underground market are the most obvious reasons for the lack of profitability, but the obviously shrunken penalties for breaking the law are a big factor as well, since legalization made it easier for the underground market to operate without fear of serious reprisals.
“The legal operator cannot compete doing things fully above board,” he said. “That’s a huge part of it. But there’s virtually no risk for people to do it completely outside the legal realm.”
The burner distro lawsuit – filed by Elliot Lewis, CEO of Catalyst Cannabis Co. – alleges that criminals have been legally buying cannabis distribution licenses by using “front men” to disguise their true identities and intentions.
The suit also claims the rogue distributors are using the licenses to buy vast amounts of legally grown marijuana at wholesale prices and then selling the product inside or outside California through unlicensed channels – a move that undercuts legal retailers and other cannabis businesses.
Lewis’ suit, filed Sept. 15 in Orange County Superior Court, also charges that state officials have ignored the actions of those who hold the burner distribution licenses.
The phrase burner distro is an offshoot of so-called “burner” cell phones, which are intended for short-term use before being discarded.
Spiker and other industry officials say many licensed marijuana companies running burner distro operations are being taken advantage of by third-party actors who had no intention of operating in the legal market.
But industry insiders also contend that many of these licensed marijuana entrepreneurs feel they’ve been given a simple choice because of the state’s harsh business landscape: Break the rules or watch your business die.
“The real takeaway from the burner distribution licenses is that the state’s regulatory framework makes it nearly impossible for legal operators to be profitable. And until that framework changes, illegal activity will continue to exist,” said Hirsh Jain, founder of Los Angeles-based consultancy Ananda Strategy.
Jain added that the current California landscape retains “elements of prohibition,” including:
  • Ongoing marijuana retail bans in more than two-thirds of municipalities and counties.
  • High state and local taxation for legal cannabis.
  • High compliance costs for businesses of all sizes.
“The barriers to entry are such that this is de facto prohibition, even if it’s not prohibition in name,” Jain said. “The real way to mitigate the illegal market is to discard those elements of prohibition.”
California’s Department of Cannabis Control (DCC) is the primary defendant in Lewis’ lawsuit, which asks a judge to force the agency to remedy the situation.
DCC officials, citing agency policy, have declined to comment on the suit. Nicole Elliott, the head of the DCC, declined to comment for this story.
Bending or breaking the rules
Multiple industry insiders guesstimated that anywhere from a third to more than 70% of the state’s thousands of licensed marijuana businesses have been skirting rules in various ways, including offloading legal cannabis into the illicit market through burner distributors.
Couple that with a broad lack of industry oversight and enforcement, industry insiders said, and it’s little surprise that burner distributors have become so widespread.
“I call it a pressure relief valve,” California marijuana consultant Jackie McGowan said. “The industry would be in chaos if it weren’t for this.”
Johnny Delaplane, the president of the San Francisco Cannabis Retailers Alliance, said it’s nearly impossible for many companies to make enough money doing business 100% by the book.
As one example, Delaplane said a company with 20 workers might have to devote three highly paid employees to comply with the state’s seed-to-sale software tracking system, Metrc.
“(Retailers’) margins are anywhere from 1%-5%, net income. At the best stores, really high volume, you might be able to get to 7%-8%,” Delaplane said.
He added that many burner distributors have been “supporting people in the industry that otherwise would be failing, and their businesses would be dying.”
Delaplane said the chokepoints for profit and loss are different for each vertical but, across the supply chain, it’s a similar story.
The same apparently holds true in the Emerald Triangle in Northern California.
But one licensed grower from Humboldt County, who requested anonymity to speak candidly, said most small farmers aren’t bothering to use burner distributors to solve their financial woes.
Instead, they’re following the legacy trafficking practices that were common before California legalized adult use in 2018 and simply marking cannabis as destroyed in the state track-and-trace system. But, in reality, the crops are being shipped across state lines to prohibition markets.
And while those farmers might not be relying on burner distributors, the underlying issue is the same: The business landscape makes it tough for legal companies to be profitable.
“I do not know anyone, not one of them, that has sold legitimately on the (legal) market this year for a profit,” the farmer said.
“Most of them, if not all of them, have taken the weed from last year … and then sold it out of state, because we have no other choice.”
On top of that, McGowan, a longtime industry consultant, said she’s been hearing of social equity program licensees winning distribution permits and then turning around and selling them to underground operators, often with the full knowledge that those licenses will be used as burner distros.
“The social equity programs are completely preyed upon for this license,” McGowan said.
“They look at this system as reparations and thought, ‘I’m going to go get me this golden ticket and get paid.’ … You’re willingly allowing someone to use your name to break the law. And some of them are so desperate, they’re like, ‘I don’t even give a s***.'”
What can be done?
Spiker said state regulators have known about the problem of burner distribution licenses for more than a year, because he’s been telling officials about it and trying to develop a workable solution.
Spiker has not hammered out an agreement. But he remains hopeful the DCC, state lawmakers and Gov. Gavin Newsom’s administration will collaborate on policy changes that give legal businesses a lifeline while cracking down on burner distributors.
Spiker proposes tightening the current 90-day tax-collection window for licensed distributors to 30 days.
He said that would generate more state marijuana tax collections and give burner distributors less flexibility to ship legal cannabis to the underground market.
The tradeoff for cannabis companies: His plan would also lower state cannabis taxes by eliminating the cultivation tax and the occasional wholesale markup rate.
Spiker is shopping around his plan but hasn’t found a bill sponsor in the Legislature to run such a measure.
Still, he suggested officials might be open to the idea.
“We need tax relief to make the legal industry more competitive,” Spiker said.
John Schroyer can be reached at john.schroyer@mjbizdaily.com.
 

New law opens California market to CBD operators around the globe​


By Kristen Nichols, Hemp Editor
October 13, 2021

Image of Welcome to California sign

California’s new CBD law is attracting attention from cannabis operators far beyond the Golden State.

They have 3.2 trillion reasons to care.

A legal change signed into law by Gov. Gavin Newsom last week opens the world’s fifth-largest economy – with an estimated $3.2 trillion gross state product – to makers of hemp-derived CBD products worldwide.

It’s a change that is grabbing attention from the CBD industry’s largest operators.

“We’ve been working on this bill for the last two-plus years,” said David Culver, head of lobbying for cannabis giant Canopy Growth in Ontario, Canada.

Canopy makes hemp-derived CBD products such as Biosteel sports-drink mixes and a Martha Stewart line of CBD gummies.

But Canopy has been holding off on selling those products in California because the state that pioneered marijuana policy wouldn’t allow over-the-counter CBD sales – until now.

“This is the bill that opens up the California market,” Culver told Hemp Industry Daily.

“This is going provide that regulatory certainty for retailers in the state so that they’re not worried about products being confiscated.”

Long time coming
The road to legal over-the-counter CBD in California was bumpy.

Low-THC cannabinoid products have been on California retailers’ shelves for years with little safety regulation.


But a 2018 ban on hemp-derived CBD in foods, drinks and dietary supplements resulted in occasional raids and product seizures.

“We had early success in California, and we built a lot of relationships, and then we kind of had the rug pulled out from under us,” said Doug MacKay, senior vice president of scientific and regulatory affairs for CBD manufacturer CV Sciences.

The San Diego company sells hemp-derived CBD in CVS drugstores and other nationwide retailers, but it pulled products from brick-and-mortar shelves in its home state.

MacKay cited a “strong marijuana lobby” for the holdup in getting CBD in California stores, but he credited cannabis negotiators for keeping at it until a compromise was made.

“What this bill really marks (is) a clear unambiguous pathway to market that gives retailers a very clear way to work with responsible CBD companies that are willing to follow the laws and have the right labeling,” MacKay said.

The new law also opens the door for hemp-derived products beyond CBD to be sold in California’s estimated 1,859 medical or adult-use marijuana retailers.
Those stores are projected to hit sales of $4.9 billion-$5.7 billion in 2021, according to the 2021 MJBizFactbook.

More negotiating to come
Not everyone is happy with the California CBD law.

Many hemp producers in the Golden State point out that the new law leaves intact a ban on smokable hemp, saying that those products can’t be sold until a new tax is enacted, a process that could take years.

“It severely hurts hemp farmers in the state of California who grow smokable-hemp flower,” said Larry Farnsworth, spokesman for the Washington DC-based National Industrial Hemp Council, which criticized the bill last month for “picking winners and losers.”

“While this is a win for the hemp industry as a whole, farmers do lose in this legislation,” the Washington DC-based group said.

Some California hemp producers have threatened a lawsuit over the new law.

Another national hemp activist, Jody McGinness of the DC-based Hemp Industries Association, argued that the change in California should be seen as a step in the right direction.

He pointed out that some California officials wanted to ban smokable hemp flower for good.

“Is the bill less than perfect? Sure. Crafting policy is a series of trade-offs,” he said.

“Finished legislation always falls short of where you want it to be, but we should take the time to celebrate this as a victory.”
Kristen Nichols can be reached at kristen.nichols@hempindustrydaily.com.
 

California cannabis company sues over ‘Breez’ trademark​


By MJBizDaily Staff
October 25, 2021
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A trademark battle is in the wind in California over the use of Breez – and Breeze – as a cannabis product brand.
Oakland-based Promontory Holdings sued The Breeze Brand of Los Angeles in state court, claiming infringement over Promontory’s California-registered “Breez” trademark, Law360 reported.
Promontory sells popular CBD-THC combo mints, tincture sprays and tablets under the “Breez” brand, while The Breeze sells CBD gummies and vape pens under “Breeze.”
The lawsuit, filed in Orange County Superior Court, could cast light on the legal strength of a cannabis trademark in California.
Promontory’s lawsuit, according to Law360, claims that the value of its Breez brand has been harmed and will continue to be harmed because of customer confusion.
The complaint says that Breez consistently is ranked as one of the top cannabis brands in California by the independent firm BDS Analytics.
Key insights to inform decisions: MJBiz Factbook
Say hello to marijuana business data, curated by the editors of MJBiz Daily to help cannabis industry leaders make informed decisions.
  • US marijuana industry financials
  • Licensing, funding & investment trends
  • State-by-state guide to regulations, taxes & opportunities
  • Insights for business and investment strategy.

Promontory registered the Breez trademark in December 2020, according to California secretary of state records. That registration doesn’t expire until 2025.
Officials from the Breeze Brand couldn’t be reached for comment by MJBizDaily.
 
Oh, they fucked it up...wow, what a surprise.

Continuing illicit market killing legal market has been a story for quite some time but, AFAIK, no significant action has taken place

California cannabis industry says it's been pushed to 'breaking point'


Several of the California's leading cannabis companies have banded together to direct a dire warning to Gov. Gavin Newsom this week. In a letter sent to the governor’s office and leaders of the state legislature, business leaders warned that the state’s legal cannabis industry is on the verge of collapse.

"It is an emergency," said David Goldman, who sits on the board of the San Francisco dispensary, The Green Cross.

Goldman is among the hundreds who have added their signatures in support of the letter, Save California Cannabis Industry, on the site Change.org.

"We need you to understand that we have been pushed to a breaking point," states the letter.

"It’s not just our dispensary, it’s every dispensary that is facing this exact problem," said Goldman.
Industry leaders behind the letter say the challenges that the industry is currently face are directly tied to how it is being regulated and taxed in the state.

Goldman says that high taxes make it incredibly challenging for the regulated cannabis industry to compete with prices being offered by illegal underground markets.

"If we don’t get in front of this tax issue. It’s going to roll right over us in the state and it’s happening quickly," agreed Michael Koehn, who sits on the leadership of the Brownie Mary Democratic Club of San Francisco, a group that advocates for medical cannabis patients.

Goldman says the underground market allows illegal suppliers to offer cannabis products that are purported to be on average, 50 percent cheaper than those of their regulated counterparts, and potentially dangerous.

"The medicine isn’t tested, and from my experience, when we’ve tested illicit cannabis, it’s often found to be high in pesticides," said Goldman. "Lowering the taxes, will put a dent in the illicit market. I think it is an excellent way in the long run to raise state tax revenue from cannabis."

A spokesperson for Newsom's office responded in a statement on Sunday.

The governor's communications director, Erin Mellon, said that the governor acknowledges the need to curb illegal sales, and supports tax reform, adding in part: "It’s clear that the current tax construct is presenting unintended but serious challenges. Any tax reform effort in this space will require action from two-thirds of the legislature and the governor is open to working with them on a solution."

Among the demands from industry leaders in the letter are an immediate lifting of the state’s cultivation tax on growers, a three-year holiday from the California’s excise tax, and expansion of retail shops through much of the state.
 
"signaled that he is open to rethinking"

Wow, now there is some concrete and firm language right there, yeah? Let's see...we got "signalling" which ain't exactly a firm statement and we have "open"...committed stuff there. LOL

I'm almost sorry I posted this article as, if read closely, it actually says pretty much nothing.



Gavin Newsom gets behind marijuana tax reform, signaling change to cannabis industry

Facing a possible industry revolt over California cannabis tax structure, Gov. Gavin Newsom on Monday signaled that he is open to rethinking the taxes the state levels on marijuana growers and purchases. The governor included in a budget proposal he released this week that he “supports cannabis tax reform and plans to work with the Legislature to make modifications to California’s cannabis tax policy to help stabilize the market.”


Asked to expand on the language at a press conference, Newsom said, “There was intention by having that language in the budget. It is my goal to look at tax policy to stabilize the market.”

Newsom’s budget projects that the state will collect $787 million in cannabis revenue during the 2022-23 tax year. Of that, the budget estimates that nearly $595 million will be available to be allocated to youth substance abuse treatment, clean-up of illicit cannabis grows and support public safety-related activities. It’s been a bumpy road for legal cannabis in California since voters approved adult-use sales in 2016. Cannabis activity, including cultivation, distribution and retail, remains outlawed in much of the state, as cities and counties have been reluctant to authorize such activities. Newsom said his goal is “to get these municipalities to wake up to the opportunities to get rid of the illegal market and the illicit market and provide support and a regulatory framework for the legal market.” Newsom’s statements, and budget proposal, came as welcome news to Elizabeth Ashford, vice president of communications for Eaze, a cannabis delivery company. Ashford previously worked for Govs. Jerry Brown and Arnold Schwarzenegger.


“I think Gov. Newsom knows and his advisers know that they can’t let the legal market fail,” Ashford said in a telephone interview after Newsom unveiled his budget proposal.


“It’s extremely important that the steps that state government can take are taken. They need to take these steps.”


Ashford is among the cannabis industry advocates who believes the legal industry is facing an existential threat with a persistent illicit market and an conflicting local regulations.


“This is a complex, important job creation ecosystem in the state. So when we talk about the legal market potentially facing an existential crisis, we’re talking about thousands and thousands of jobs and also millions in revenue,” she said.


Michael Steinmetz, founder of Flow Cannabis Co., one of the largest cannabis brands in the state, also applauded Newsom’s announcement. Steinmetz made headlines last year when he vowed to wage a tax revolt against the state if it failed to initiative industry tax reforms. Steinmetz is among a group of cannabis entrepreneurs and advocates planning rallies at the Capitol, one on Thursday, Jan. 13, and one on Jan. 26.


“We are grateful the governor has heard the cries of large and small business owners, farmers, employees, patients and consumers about the dire state of legal cannabis in California. To the Legislature, we now ask that you too hear our cries and join us on Jan. 13 and 26 as we share our stories on Sacramento’s Capitol steps,” Steinmetz said in an email.
 

LA County Introduces Ordinance to Charge Illegal Cannabis Operations $30,000 Per Day

The hefty, daily fine is intended to deter illegal cannabis endeavors from operating.

Los Angeles County has long been home to illegal cannabis endeavors, and now the Board of Supervisors has approved the introduction of an ordinance that could charge illegal cannabis operations tens of thousands of dollars per day.

The Los Angeles County Board of Supervisors voted unanimously on Tuesday to introduce an ordinance to start fining illegal cannabis businesses. Any cultivation or dispensaries operating without a permit in unincorporated areas of the county could soon be charged $30,000 every day. Although the introduction was approved, the ordinance still needs to be voted on by the Board for formal adoption.

The official motion text describes the “nuisance abatement ordinance” that could be approved in a future meeting. “The unpermitted commercial cannabis activities including illegal cannabis cultivation are incredibly profitable and in particular, cannabis cultivation has continued to proliferate due to the ease of establishment in more remote and rural locations,” the motion reads. “Therefore, the penalties contained within the draft ordinance should, consistent with State law, be adjusted and increased to ensure that they act as a deterrent to the continued operation of illegal commercial cannabis operations.”

The motion was written by Supervisors Kathryn Barger and Sheila Kuehl. “The County Code currently prohibits all commercial cannabis activity within the County’s unincorporated areas, including the establishment, maintenance, and operation of any commercial cannabis business activity, and the renting or leasing of, or allowing property to be used for that purpose in all zones,” the motion states. “However, the County continues to be inundated with unpermitted cannabis dispensaries in the unincorporated areas. Despite the efforts of numerous County departments, the growth of unpermitted cannabis dispensaries continues to outpace enforcement.”

Barger presented the motion with the hope that it could help cull illegal cannabis operations, noting that water supplies that contain chemicals pose both a threat to public safety, among other concerns. She states that even though the county’s work against illegal cannabis is steadfast, a lack of “legally enforceable options” puts the efforts at a disadvantage.

In a press release, Barger summarized how these illegal cannabis businesses are harming the county. “Unpermitted commercial cannabis cultivation is profitable and has thrived in the rural Antelope Valley because of how easy it is to stand up operations. Communities in the desert continue to report illegal large scale cannabis grows that have been accompanied by water theft, trespassing, trash and the use of dangerous pesticides and fertilizers, putting residents’ health and safety at risk.”

Supervisor Sheila Kuehl also agreed that something needs to be done. “California voters legalized recreational cannabis in order to create a system that assured consumers of product safety while prohibiting cannabis access to minors,” said Kuehl, “but illegal cannabis operations continue to undermine the will of the people. This motion puts teeth in enforcement and ensures that unpermitted dispensaries face stiff penalties in the future.”

Supervisor Janice Hahn confirmed that strengthening and protecting the region’s legal cannabis businesses is also a way to tackle the illegal businesses head-on.

“I do know that providing a legal pathway for people to grow, produce, sell cannabis can help in some way to tackle the illegal market,” Hahn shared. “Hopefully, we’re going to be voting soon on the idea of legally providing options for cannabis businesses in unincorporated county [areas].” A news release on Barger’s website confirms that a study is being conducted to determine recommendations for legal cannabis businesses, such as retail, manufacturing, distribution and more.

In October 2021, Los Angeles County set aside $5 million to fund the effort to combat illegal cannabis in Antelope Valley. A press release states that $2.4 million will go to the Los Angeles County Sheriff’s Department and $1.2 million toward the department’s Marijuana Eradication Team, while $503,000 will go toward Lancaster Sheriff Station overtime patrols and $707,000 will be used to buy trucks that can traverse tough terrain in these investigations.
 

LA County Introduces Ordinance to Charge Illegal Cannabis Operations $30,000 Per Day

The hefty, daily fine is intended to deter illegal cannabis endeavors from operating.

Los Angeles County has long been home to illegal cannabis endeavors, and now the Board of Supervisors has approved the introduction of an ordinance that could charge illegal cannabis operations tens of thousands of dollars per day.

The Los Angeles County Board of Supervisors voted unanimously on Tuesday to introduce an ordinance to start fining illegal cannabis businesses. Any cultivation or dispensaries operating without a permit in unincorporated areas of the county could soon be charged $30,000 every day. Although the introduction was approved, the ordinance still needs to be voted on by the Board for formal adoption.

The official motion text describes the “nuisance abatement ordinance” that could be approved in a future meeting. “The unpermitted commercial cannabis activities including illegal cannabis cultivation are incredibly profitable and in particular, cannabis cultivation has continued to proliferate due to the ease of establishment in more remote and rural locations,” the motion reads. “Therefore, the penalties contained within the draft ordinance should, consistent with State law, be adjusted and increased to ensure that they act as a deterrent to the continued operation of illegal commercial cannabis operations.”

The motion was written by Supervisors Kathryn Barger and Sheila Kuehl. “The County Code currently prohibits all commercial cannabis activity within the County’s unincorporated areas, including the establishment, maintenance, and operation of any commercial cannabis business activity, and the renting or leasing of, or allowing property to be used for that purpose in all zones,” the motion states. “However, the County continues to be inundated with unpermitted cannabis dispensaries in the unincorporated areas. Despite the efforts of numerous County departments, the growth of unpermitted cannabis dispensaries continues to outpace enforcement.”

Barger presented the motion with the hope that it could help cull illegal cannabis operations, noting that water supplies that contain chemicals pose both a threat to public safety, among other concerns. She states that even though the county’s work against illegal cannabis is steadfast, a lack of “legally enforceable options” puts the efforts at a disadvantage.

In a press release, Barger summarized how these illegal cannabis businesses are harming the county. “Unpermitted commercial cannabis cultivation is profitable and has thrived in the rural Antelope Valley because of how easy it is to stand up operations. Communities in the desert continue to report illegal large scale cannabis grows that have been accompanied by water theft, trespassing, trash and the use of dangerous pesticides and fertilizers, putting residents’ health and safety at risk.”

Supervisor Sheila Kuehl also agreed that something needs to be done. “California voters legalized recreational cannabis in order to create a system that assured consumers of product safety while prohibiting cannabis access to minors,” said Kuehl, “but illegal cannabis operations continue to undermine the will of the people. This motion puts teeth in enforcement and ensures that unpermitted dispensaries face stiff penalties in the future.”

Supervisor Janice Hahn confirmed that strengthening and protecting the region’s legal cannabis businesses is also a way to tackle the illegal businesses head-on.

“I do know that providing a legal pathway for people to grow, produce, sell cannabis can help in some way to tackle the illegal market,” Hahn shared. “Hopefully, we’re going to be voting soon on the idea of legally providing options for cannabis businesses in unincorporated county [areas].” A news release on Barger’s website confirms that a study is being conducted to determine recommendations for legal cannabis businesses, such as retail, manufacturing, distribution and more.

In October 2021, Los Angeles County set aside $5 million to fund the effort to combat illegal cannabis in Antelope Valley. A press release states that $2.4 million will go to the Los Angeles County Sheriff’s Department and $1.2 million toward the department’s Marijuana Eradication Team, while $503,000 will go toward Lancaster Sheriff Station overtime patrols and $707,000 will be used to buy trucks that can traverse tough terrain in these investigations.
While at the same time CA tax structure is killing the legal market.
 
These assholes will look for any reason why the black market is thriving except to look in the mirror and see that their high tax rates guarantee a market for illegal weed


Back to prison for cannabis growers? Push to roll back marijuana legalization in California is here


You could fool yourself into thinking marijuana legalization was like breathing air or wearing socks: one of the few things most Americans could be trusted to agree upon.

Since 2012, nearly every major cannabis-related ballot measure put before voters has won handily; in that time, aside from a few outliers like a publicly funded lawsuit challenging voter-approved legalization in South Dakota, politicians have not even bothered to attempt an errand so hopeless as curtailing cannabis’s winning streak.
That may finally be changing. Fed up with enormous illegal grows that keep proliferating in his rural Southern California district, state Assemblyman Thurston “Smitty” Smith (R-Apple Valley) introduced a bill last week that, if passed, would roll back part of the state’s voter-approved marijuana legalization law and make growing more than six cannabis plants a felony again.

And though this effort as written is almost certain to fail, the idea of sending the cops after cannabis growers again is gaining traction—including with Gov. Gavin Newsom, legalization’s erstwhile poster boy.

Passed on Election Night 2016, California’s Adult Use of Marijuana Act eliminated almost all cannabis-related felonies. The only nonviolent weed-related crimes that can land you in state prison involve selling pot to a minor. So the maximum penalty for growing 100 plants, 1,000 plants, 10,000 plants—pick a number! The only limit is your imagination—is a couple of misdemeanors and a year in jail.

t’s this “soft on crime” approach (which a majority of his constituents approved) that law enforcement and, dutifully, cop-friendly lawmakers like Smith are blaming for the proliferation of enormous grows in his district.

Contacted for comment, Smith’s office did not provide a statement by publication time. In a brief press release announcing the bill, Smith said illegal growers are “operating with impunity, knowing that the law allows them to grow with barely a hindrance.”

“For far too long, Sacramento has been soft on crime, and the illicit market has exploded with massive unlicensed grows popping up all around the state,” he said.
Not for nothing, Smith has been a reliable cheerleader for police raids on unlicensed cannabis growers in his district, including a five-month-long-and-counting caper called “Operation Hammer Strike” by the San Bernardino County Sheriff’s Office that only recently netted 15 arrests.

In this, he’s right: there are illegal grows all over the state. And both the marijuana industry and Newsom, an early endorser of legalization, have blamed these grows for the overtaxed legal industry’s struggles.

But who cares? As written, Smith’s bill is almost sure to fail. He needs a two-thirds majority in the state Legislature to amend a ballot initiative. As a conservative Republican who backed Newsom’s failed recall last August, up against a Democratic supermajority in Sacramento—where, according to several sources, the unofficial maxim on public safety is “no new crimes”—he is very unlikely to get it.

However, Smith’s effort at undoing a part of marijuana legalization represents a growing discontent with how marijuana legalization has played out. Until now, this frustration has been mostly from law enforcement.

That said, Smith’s bill could be seen as a starting-off point? What if instead of seven plants triggering a felony, it were 100? What about 1,000? Surely any reasonable person could agree that acres-large weed grows need a license—and that if they don’t have one, the police should be involved!

That’s the dangerous logic that could see California start imprisoning people for weed again. And certain influential thought leaders are on board.
By now, most California cannabis industry insiders and observers (and even some lawmakers) agree that the state overtaxes weed. From a regressive cultivation tax to a punitive excise tax to local taxes as well as state sales taxes, for every $40 bag of weed, consumers can expect to fork over 40 percent to the taxman.
So tax reform is one proposed technique to save legalization. Another technique is to send the cops after the illegal market again.

In an interview with CalMatters, Keith Humphreys, a professor of psychiatry at Stanford University and a renown drug-policy expert, said cracking down on unlicensed operators—the helicopters, the raids, all the old ways—was “more sensible than messing with taxes.”

Newsom might be thinking similarly. For one, he’s already sicced the authorities on weed, sending his personal army—the state National Guard—after illegal growers. In the same CalMatters article, Newsom’s “weed czar,” state Department of Cannabis Control Director Nicole Elliott, said that legalization’s problems are “not tax alone.”
That’s worrisome to legal growers like Johnny Casali, the proprietor of Huckleberry Hill Farms in the state’s Emerald Triangle.

Smith is “obviously supporting the Gavin Newsom theory: that the reason why the California market is failing is because of the black market,” he said.
“That’s their way of really keeping the public from really understanding that it’s the taxes causing the downfall of the California market.”
“They can bust every illegal grower, and that will not help the legal businesses that are struggling,” he added.

“I really want to believe and trust the state of California to do the right thing, to protect me, and have my back here.”
 
And just how long did it take high paid consultants and focus groups to determine this bold strategy? The driver of the #24 bus in San Jose could have told Newsome this years ago.


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https://www.marijuanamoment.net/u-s-senator-mocks-home-states-marijuana-law-during-abortion-debate/
https://www.marijuanamoment.net/u-s-senator-mocks-home-states-marijuana-law-during-abortion-debate/

Politics3 days ago

California Governor Proposes Marijuana Tax Cuts To Combat Illicit Market​



The governor of California unveiled an updated budget proposal on Friday that calls for the elimination of the state’s marijuana cultivation tax and revised cannabis tax revenue allocations.


Gov. Gavin Newsom’s (D) May revised budget would take steps intended to combat the illicit market and make the legal industry more competitive, in large part by zeroing out the cultivation tax that marijuana businesses currently incur.


It’s a move that stakeholders have been pushing for, especially as businesses have struggled to keep up with rising inflation and reduced demand compared to peak coronavirus pandemic levels. The governor emphasized on Friday that he was specifically committed to exploring ways to minimize the influence of illicit growers and sellers on undercutting legal, licensed businesses.


And while one might assume that removing the cultivation tax would hamper revenue streams for the state, a recent analysis from the Reason Foundation actually found that monthly tax revenue would increase by 123 percent by 2024 if the policy change was enacted.


The report said that ending the cultivation tax would mean lower costs for consumers and, therefore, increased legal purchases that would more than offset any revenue losses over time.

Newsom’s proposal on its own isn’t binding, however. It would need to pass the legislature with at least a two-thirds majority in order to be implemented.


“We’ve been working very closely with legislative leaders, and we’ve made tremendous progress,” the governor said at a briefing on Friday. “We haven’t finalized any of that, so I want to be careful not to disrupt that progress.”


Sam Rodriguez, policy director for the cannabis farmers advocacy group Good Farmers Great Neighbors, praised Newsom’s move in a statement to Marijuana Moment.


“California farmers are pleased that the governor has taken a leadership role in addressing the ills of the illicit market with a starting point on tax relief,” he said. “We look forward in working the legislative budgetary process to obtain more tax relief necessary to stabilize the supply chain. The legal market in our state needs a real bootstrap approach from our state. Anything less will potentially devastate the newly created cannabis economy. And that would be a travesty.”


The governor’s revised budget proposal also includes updated estimates on tax revenue allocations for the 2022-23 fiscal year.


The state is expecting to distribute $401.8 million for education, youth substance misuse treatment and school retention; $133.9 million for environmental clean-up and remediation related to illicit cannabis manufacturing and $133.9 million for law enforcement purposes.


“These figures reflect a total increase of $74.7 million compared to the Governor’s Budget estimate,” the revised budget summary says. “These estimates also reflect the proposed statutory changes to restructure the cannabis tax framework and maintain a baseline level of funding for this allocation.”


Separately, the governor’s plan would involve shifting “the point of collection and remittance for excise tax from distribution to retail on January 1, 2023,” while maintaining the 15 percent excise tax rate on marijuana sales.


The budget further calls for the creation of a one-time “cannabis local jurisdiction retail access grant program” to support the development and implementation of local retail licensing efforts. The $20.5 million for that program would come out of the state general fund. Localities that license equity applicants could receive additional funding.


Newsom said the goal of the initiative is “addressing the persistent issue that is exactly what we anticipated would be a persistent issue—and that’s dealing with the black market, going after the illegal growers and the illegal operators.”


“This is beginning of a process,” he said. “From my humble perspective, in terms of my thinking, this will be a multi-year process to get that black market, get it on the retreat—not the ascendancy—and to get the retail and responsible adult-use market on steady ground.”


Nicole Elliott, director of the Department of Cannabis Control, said that the budget’s cannabis provisions would “remove unnecessary administrative burdens and costs.”


“We have heard from many of you who have said that the current cannabis tax framework is overly complex,” she wrote in an email to industry stakeholders. “We know that current tax policies disproportionately burden cannabis farmers and small businesses and create instability throughout the supply chain, ultimately undermining the societal benefits of a taxed and regulated market.”


Meanwhile, California officials announced in January that the state had awarded $100 million in funding to help develop local marijuana markets, in part by getting cannabis businesses fully licensed.


The state Department of Cannabis Control (DCC) distributed the funds to 17 cities and counties where there are a disproportionate number of provisional marijuana licenses, rather than full-year licenses. The department first announced that applications for the Local Jurisdiction Assistance Grant Program had opened in October.


Also last year, the state said it was awarding about $29 million in grants to 58 nonprofit organizations, with the intent of righting the wrongs of the war on drugs. The funding is being provided through the California Community Reinvestment Grants (CalCRG) program.


Grants are being awarded to qualifying nonprofits to support programs aimed at providing job placement, mental health treatment, substance misuse treatment and legal services for disproportionately impacted communities. The program was first announced in April 2020, and applications for those grants were initially opened in September 2020.


Officials with the California Department of Fish and Wildlife also said last year that they were soliciting concept proposals for a cannabis tax-funded program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts.
 

Sonoma, California Ease Tax Burden for County Weed Farmers

The move in Sonoma comes as the state’s cannabis industry faces difficult headwinds.

Officials in Sonoma, California moved this week to provide tax relief to the area’s cannabis cultivators, another decision driven by the continued economic struggles of the state’s legal marijuana industry.

North Bay Business Journal reports that the Sonoma County Board of Supervisors “voted 4 to 1 on Tuesday to change how the tax on cannabis cultivation is set, lowering the amount some growers will pay while raising it for others,” making it so that “cannabis growers in the county’s jurisdiction will be taxed based on which of the size of their operations categorized into three different methods, calculated on a gross receipt tax rate of 2.5%.”

The change will take effect in July, per the Journal, which noted that cannabis growers “will pay [a] rate of $0.75 per square foot for outdoor operations; $12.50 per square foot for indoor cultivation, and $3 per square foot for mixed-light cultivation where a combination of artificial and natural light is deployed.”

This week’s vote comes almost a year after the Sonoma County Board of Supervisors slashed cannabis cultivation taxes by nearly 50%.

James Gore, the chair of the Sonoma County Board of Supervisors, told High Times last March why he advocated for the new tax alignment.

“This tax reduction is in line with the market impacts that cannabis producers are encountering right now with a precipitous drop in wholesale price-per-pound,” Gore said at the time. “The reason that this was justified, merited, warranted is that our cannabis tax, like many other jurisdictions, was based on coverage—square feet. It was intended to be one and 5% of gross receipts, but when you have a drop in wholesale price, and you’re still taxing based on square footage, all of a sudden that potential 3-5% grows into not just 15 or 20—but upwards of that.”

Gore explained that the previous “tax policy did not fit the scenario of what was going on.”

“It was ultimately voted on 5-0 but there was a lot of dispute in the discussion. There were some who didn’t want to back off of the tax,” Gore said. “In the meantime, we’re going to be moving into a gross receipts model. So it will take us a while to settle on how to do that effectively. So that means, as it should, that it fluctuates up and down with market conditions. That is the ultimate goal.”

“We were putting people out of business with our policy, so this is the right thing to do,” he continued. “The reduced cultivation tax rates are needed to account for changes in the market and our Board’s policy direction. The revenue surplus in our cannabis program will support operational costs for two years as we transition to a new tax model and policy framework. We’re committed to getting this issue right for Sonoma County, and that means continuing to work between neighborhoods and industry advocates, learning from other counties, and finding local solutions that are fair and sustainable for both communities and the environment.”

This week’s vote by the board was in the same spirit, with the North Bay Journal reportingthat the move came “after months of heavy pressure from cannabis industry representatives, who have complained that layers of local and state taxes have hampered businesses in California’s legalized market.”

Legal cannabis industries across the country have fallen on hard times, as customers increasingly turn to the illicit market for cheaper prices, while growers and operators participating in state-sanctioned programs are often burdened with onerous taxes and regulations.

A survey last year from the National Cannabis Industry Association found that only 37% of cannabis operators nationwide are profitable. In California, it was only 26%.
 
Another example of local government taking action while the whole of CA cannabis industry flounders under high taxes, egregious regulation, and basically fucking up the roll out of the program...in a rather big way.

They just won't learn...sigh


Long Beach to look at reducing retail cannabis taxes as the industry continues to struggle


Long Beach could again look at cutting taxes for its ailing legal cannabis industry, as operators say the sector has been hamstrung by a long list of state and local taxes that continue to make it non-competitive with the illicit market.​

The City Council is scheduled to vote on an item Tuesday night that would direct city management to look at ways to cut taxes for the industry, specifically the gross receipts tax charged on top of normal tax for adult use (8%) and medical cannabis sales (6%).

Those taxes are additional to statewide taxes charged to cannabis operators and the city’s regular sales tax charged to other retail transactions.

The current tax rate, which was approved by voters, went into effect at a time when the industry was looked at with skepticism by council members, who thought cannabis operations would actually cost the city money through increased costs for police patrols. Instead, cannabis taxes have been a reliable source for the city’s general fund, which is projected to take in about $12 million this year.

However, those taxes, along with levies on other aspects of the cannabis industry like cultivation, manufacturing and distribution, have led to markups on the retail end.

“At the end of the day, every operator must sell it through the legal market, and that’s a dispensary,” said Adam Hijazi, president of the Long Beach Collective Association and owner of the Green Room and The Station.

“And when those products are marked up because of the taxes, the residents pay for it. We can’t sell their products because nobody wants to buy them at prices.”

Hijazi said medicinal sales should have no additional taxes placed on them, likening medical cannabis patients to people picking up other prescriptions at the local pharmacy, which are not taxed in California.

For adult use cannabis sales, which made up the majority of the cannabis taxes collected by the city each year, Hijazi said the LBCA would like to see a rate around 3%.

The reduced tax rate can be made up by increased sales, which he and others in the industry believe will come when they’re able to sell products at a lower price, but also through new business operations that he’d like the city to make legal.

Hijazi said things like on-site consumption lounges and events where people are able to legally consume cannabis could be a boon for industry operators in the city.

“What we’re asking for is not just a reduction in taxes, but a reimagining of what this industry can be in a safe and responsible way,” he said.

Councilmember Joni Ricks-Oddie, one of the three members who are requesting the city to take a look at the tax rates, said that this issue falls in line with Mayor Rex Richardson’s plans to promote and enhance other industries in the city as legacy sources of revenue, like oil production, dry up.

“As we’re going to phase out oil revenue, how are we going to replace that?” Ricks-Oddie said.

Long Beach has said it plans to phase out oil production by 2035, but state laws could accelerate that phase-out and cost the city as much as $20 million annually before the anticipated end of operations in 2035.

Ricks-Oddie wouldn’t commit to a percentage for a new cannabis tax. Instead, she said that’s what she’d like city management to examine and bring back for the council to consider, with the potential budget ramifications if the council does move forward with reductions.

However, Tuesday’s agenda item cites a recent tax reduction program in Santa Ana, which provided up to a 3% tax break for operators that paid their employees above the state minimum wage, offered a majority of their workers full-time hours, hired from low-income neighborhoods in the city and provided opportunities for advancement for its employees.

Santa Ana’s tax reduction provided a 1% cut across the board but granted an additional 2% drop for businesses that met its labor standards.

“My overall goal with this particular item is for the city to foster the idea of a positive feedback loop,” Ricks-Oddie said.

In 2019, Long Beach reduced taxes on distribution, cultivation, manufacturing and lab testing, dropping those rates from 6% to 1%. State officials also lowered taxes on cultivation in 2022 in hopes of helping the industry.

The budget implications of cutting cannabis taxes could be big. The city is already projecting a small deficit of $6 million going into the next fiscal year, which starts in October.

City officials will also have to contend with diminished Measure A revenue over the next few years as a portion of it is diverted to pay for the city’s share of the countywide Measure H tax to fund homelessness initiatives, something the city had not paid into until this year.

It’s unclear how long it will be before a potential tax decrease proposal comes back to the City Council, but Hijazi said that time is not something that the industry has.

“We’re happy that it’s coming, but we can’t wait,” he said. “We want to see it go through as soon as possible.”
 
And yet another story about the negative...and apparently anticipatable by all but greedy fucking politicians....impact of a cannabis tax cash free for all by government. I mean...who would have thunk. Fucking idiots.

And what is their response....mind boggling:

"At budget hearings on April 21, the county supervisors tackled more fallout from the market decline as they looked for ways to extract more cash from the industrial-scale cannabis that they paved the way for, five years ago.​

Amid the Cannabis glut, growers are pulling out of Santa Barbara county


North County Operators with Permits for More Than 160 Acres of Pot Walked Away This Month, as Supervisors Sought Way to Shore Up Slumping Cannabis Tax Revenues.​

In a sign of the times, four growers who had obtained zoning permit approvals to plant 163 acres of outdoor cannabis in the North County withdrew their applications for business licenses this month, effectively abandoning their operations, county officials said.

Those withdrawals were on the minds of county supervisors during budget hearings this month as they wrestled with an ongoing decline in cannabis tax revenues. They want to boost revenues even as they acknowledge that higher taxes could force out more growers.

“I want to see us come up with something that’s fair, just and predictable, as much as we can,” said Supervisor Steve Lavagnino of Santa Maria, a chief architect of the county’s 2018 cannabis ordinance. “We’re in a downturn, no doubt, and we’ve got to weather it.”

Amid a glut on cannabis in California, the prices for wholesale cannabis flower have plunged by half from their peak of $1,400 in 2020 to about $660 per pound now. The state is believed to be producing three times as much pot as residents can consume — much of it grown in Santa Barbara County — effectively fueling the black market where, by most estimates, two-thirds of the sales are taking place.

Statewide, county officials said, the number of active cannabis cultivation licenses has fallen by 20 percent since early 2022, as a host of provisional licenses expired and were not renewed.

The largest of the cannabis withdrawals in Santa Barbara County this month was submitted by SFS Farms OPCo l LLC at 4874 Hapgood Rd., on a ranch owned by Bob Campbell at the western end of the Sta. Rita Hills wine region, west of Buellton. The then-owners, investors in Colorado and Manhattan Beach, had proposed to plant 87 acres of cannabis there.

Back in early 2021, representatives of the Melville, Gainey, Zotovich and other vineyards, joined by a group of neighbors on Highway 246, had turned out in bitter opposition to the SFS project. At a public hearing, they were dismissed as “misinformed,” “biased” and “fear-mongering” by an SFS attorney as they argued that the massive size of the proposed grow — about 65 football fields’ worth of marijuana — would overwhelm nearby homes and tasting rooms with the skunky smell of pot and blow it into Buellton on the prevailing winds.

The Board of Supervisors approved a zoning permit for SFS Farms, with Supervisor Joan Hartmann, who represents a portion of the Sta. Rita Hills, casting the only “no” vote. But the project never got off the ground.

Representatives for SFS, a shell company that was set up in Nevada, could not be reached for comment this week on their decision to withdraw. But Al Wagner, a senior vice president of agriculture for Foley Family Farms, a wine and avocado operation next to SFS Farms, said the family had been put to some expense and worry over the potential impacts of a cannabis operation next door. Foley Family Farms is located directly west of SFS Farms on what used to be the Fess Parker Vineyard.

“The county ordinance is not effective at managing conflicts between cannabis and other agricultural activities such as vineyards, wineries and other crops,” Wagner said. “Foley Family Farms believes this project was not well sited and would cause significant impacts to surrounding agriculture. We are pleased to learn SFS has abandoned its cannabis operations.

“It’s been a very expensive road over the last three or four years,” Wagner said, There was the cost of preparing for public hearings, he said, and the concern that pesticide spray drift from avocados onto cannabis “could impact us from a legal standpoint.”

In addition to SFS, plans for 63 acres of cannabis at 3700 Telephone Rd. in the Santa Maria Valley were withdrawn by WTMCA LLC; plans for nine acres at 3151 San Julian Road in the Lompoc Valley were withdrawn by JJPC Creekside; and plans for four acres at 365 N. Refugio Rd. in Santa Ynez were withdrawn by Elements 5.0 Corporation LLC, according to Sydney Pettaway, a business specialist with the County Executive Office.

Since the county started tracking withdrawals last fall, growers have walked away from plans for about 285 acres of cannabis, she said.

“It’s unfortunate; we’ve lost a lot of operators who wanted to pursue their business licenses,” Pettaway said. “It’s been tough. You never want to see people fall out that way.”

Tapping the Wait List​

For other growers, the recent withdrawals may represent an opportunity. To replace those who walked away this month, two growers already on the eligibility list have been offered an expansion in acreage under the county’s 1,575-acre cap on outdoor cannabis, Pettaway said.

Anderson Development SB LLC would have the opportunity to expand by 82 acres for a total of 187 acres at 100 Salisbury Canyon in the Cuyama Valley, potentially becoming the largest cannabis operation in the county. In state filings, Micah Anderson of La Jolla is listed as the manager of Anderson Development; he is the founder and CEO of LEEF Holdings of La Jolla, one of the state’s largest vertically integrated cannabis companies.

In addition to Anderson, Pettaway said, Heavenly Green Inc. has been offered the chance to expand by 23 acres for a total of 60 acres at 4301 Dominion Rd. in the Santa Maria Valley.

Finally, six other cannabis operators on the waiting list can now apply for county business licenses under the acreage cap, Pettaway said, as follows: 25 acres at Z Farms, 6893 Foxen Cyn Rd. in Los Olivos; 17 acres at Cat Cyn Inc., 7050 Long Canyon Rd. in the Santa Maria Valley; six acres at Cuyama Greens, 501 Harvey Rd. in the Cuyama Valley; four acres at 92nd G25, 851 E. Hwy 246 in the Lompoc Valley; three acres at Calynx Inc., 6968 Cat Canyon Rd. in the Santa Maria Valley; and two acres at Stateside Greens, 3851 Telephone Rd. in the Santa Maria Valley.

If any of these growers are not ready to apply for a license, the county will offer a spot on the eligibility list to the next grower in line, Pettaway said. In all, she said eight operators proposing 77 acres of cannabis remain on the waiting list; all have been approved for zoning permits.

In addition to the North County withdrawals, Yamaoka, a proposed three-acre greenhouse operation at 1552 Casitas Pass Road, has been removed from the eligibility list, Pettaway said. The operator had made no progress on the business license application and did not respond to the county’s requests for information, she said.

‘We Had High Hopes’​

At budget hearings on April 21, the county supervisors tackled more fallout from the market decline as they looked for ways to extract more cash from the industrial-scale cannabis that they paved the way for, five years ago.

Cannabis has been, at best, a volatile revenue source for the county. This year’s tax revenues from cannabis, estimated at $6.7 million, will be coming in nearly 60 percent below the county’s $16.3 million projection for fiscal year 2022-23, records show. Last year’s revenues fell well short, too, because of the glut on the market.

Next year, the county is projecting $7.5 million in cannabis revenues, a slight increase based on a few new pot shops that are expected to open. But that’s less than half the revenue peak of $15.7 million in 2020-21.

The expenses alone for what the county calls its “cannabis program” come to nearly $6 million yearly, including law enforcement, permitting and tax collection.

“We had high hopes for the cannabis tax as a way of growing the pie, and that’s a big question now,” said Supervisor Joan Hartmann, who represents the wine country west of Buellton, where vintners and urban residents have clashed with outdoor cannabis growers over the pungent smell of pot at harvest time. “We’re trying to find an alternative, so that we don’t have to have service-level reductions.”

In that vein, the supervisors discussed how a potential library tax and increases in the local sales tax, hotel bed tax and Montecito flood control assessments might help the county keep pace with growing labor and operational expenses in fiscal year 2023-24 and beyond. Any formal tax proposals would appear on the November 2024 ballot, at the earliest.

For now, the board authorized the “swap” of $7 million in non-cannabis monies from the general fund to pay for libraries, long-term planning, and park and trail improvements — expenditures that had been previously earmarked for cannabis funds.

Still, as board Vice Chair Steve Lavagnino, a chief architect of the county’s permissive cannabis ordinance, pointed out, cannabis taxes have brought in $50 million since 2018. That’s more than any other tax program aside from property taxes. (This fiscal year alone, property taxes are projected to bring in $262 million, or 77 percent of the county’s $340 million general fund.)

‘Nobody’s Happy’​

The bread and butter of the cannabis taxation system in Santa Barbara County is its four percent tax on gross sales receipts, or gross income, from cultivation. But because it relies on self-reporting, the deficiencies have been glaring. The county’s quarterly tax reports show that many growers routinely report zero receipts or fail to report at all.

The county Treasurer-Tax Collector will spend $522,000 this fiscal year to conduct audits of cannabis growers, who sometimes don’t understand that it’s a taxable transfer when they move plants from a nursery to mature cultivation, said Brittany Odermann (formerly Heaton), principal analyst for cannabis in the County Executive Office. The county’s taxes on gross receipts range from one percent for nursery plants to six percent for retail cananbis.

“I’m constantly frustrated by the gross receipts tax,” said Supervisor Bob Nelson, whose district includes part of the Sta. Rita Hills, a federally designated American Viticultural Area. “I’ve always desired something that would reduce complexity and increase transparency. I want us to get out of the auditing business. We have had to build all this infrastructure to try to make sure we’re catching people.

“We have a lot of really good operators in the county, and we also absolutely have some not so great operators that are avoiding taxes by moving product around and selling it back to themselves at different numbers.”

A change to a cannabis tax based on the square footage of the “canopy” of the plants under cultivation — the most widespread tax system in use in the California — would guarantee a larger and more predictable revenue stream, Odermann told the board. It also would discourage operators with permits from not growing any cannabis, she said.

A rough estimate of revenues based on square footage of cannabis under cultivation if, say, the county imposed a tax of 60 cents per square foot of Carpinteria greenhouse cannabis and 30 cents per square foot for outdoor cannabis in the North County — within the range of what other counties are assessing — Santa Barbara County might see tax revenues of $19 million yearly, Odermann said.

Under that scenario, she said, a typical outdoor operation, at 60 acres, would pay $588,000 per year in tax revenues; a 25-acre outdoor operation would pay $245,000; and a typical greenhouse operation, at five acres, would pay $98,000.

‘No Perfect Answer’​

Yet across California, some counties that base their cannabis tax collection on the square footage of “grows” have significantly reduced their rates, Odermann said. Some, she said, are considering at least partially adopting a system like Santa Barbara County’s to capture market fluctuations. Yolo and Santa Cruz counties rely on a gross receipts system, and they are sticking with it even as growers are pulling out.

“Nobody’s happy right now with the state of cannabis tax revenues,” Odermann told the board. “It’s not so much how they’re being collected; it’s really about the market and the inability of the legal market to take hold. There’s no perfect answer here.”

Humboldt County, which regularly trades places with Santa Barbara County as No. 1 in the state for active cannabis cultivation licenses, has suspended its tax rates altogether for cannabis cultivation for two years, Odermann said.

“The market is down,” she said. “Is that the way it’s going to be forever? I don’t necessarily think so. The people who know what they’re doing are going to stick with it and there’s going to be revenue there.”

Other counties are looking into building hybrid tax systems based on gross receipts and the square footage of cannabis operations, Odermann said, adding, “Many of these jurisdictions are finding that more flexibility they can build into their ordinance to account for these market fluctuations, the better off they are.”

The board may want to consider assessing a minimum tax based on square footage, together with a tax based on gross receipts beyond that minimum, and make annual adjustments to keep up with the market, Odermann said. There’s no precedent for such a model, she said, adding, “To date, there hasn’t really been an industry standard for indexing.”

The only public comment at the April 21 hearing came from Joe Armendariz, a cannabis industry consultant who said Humboldt County got it right.

“Good grief,” he said, “… the cannabis industry is in a severe recession … To contemplate raising taxes on our beleaguered cannabis industry would just be counterproductive.”
 
Yes, Virginia...with government, its about the getting the Dead Presidents and always has been. Did you think cannabis is gong to be different? LOL

And of course this is in CA where the total of the tax burden has absolutely ensured the continuance of the illegal market.

California to implement ‘Death Penalty’ tax rule

Cannabis license holders in Santa Barbara County must pay quarterly taxes or risk losing their licenses.

Santa Barbara County officials are stepping up rules to get cannabis businesses to be current on their tax payments. On June 27, the Santa Barbara County Board of Supervisors approved harsher penalties on cannabis businesses that aren’t paying their taxes on time.

Beginning in August, cannabis businesses in Santa Barbara County, California that don’t pay their quarterly taxes or file the appropriate paperwork within the 30-day grace period could lose their license to operate.

“It’s that severe,” Deputy County Executive Officer Brittany Odermann told the Board of Supervisors at the June 27 meeting. “You are late. … You cannot renew.”

Supervisors unanimously voted to approve measures to increase penalties on cannabis license holders as a way to abate a growing number of failures with timely payments and report filing.

The problem of back taxes has been stacking up in the county, and not surprising, considering that fewer than a quarter of U.S. cannabis businesses are turning profit, according to Whitney Economics.

Santa Maria Sun reports that during a June 6 cannabis meeting, county staff reported that 12 operators hadn’t submitted their third quarter tax report by April 30. Three operators filed between April 30 and June 6. At that meeting, supervisors asked staff to strengthen the penalties and consequences related to timely tax reporting and payment, which are due on the last days of January, April, July, and October.

Santa Barbara Supervisors Weigh In

Some supervisors didn’t agree with the implementation of harsher penalties.

“This is not the way that we collect taxes in the county. I think we’ve gone from a kind of slap on the wrist to a death penalty,” 5th District Supervisor Steve Lavagnino said. “That would be like if you’re one day late on your TOT [transient occupancy tax], you have to shut your hotel down, or if you’re one day late on your property taxes, you gotta move out of your house.”

He added that forcing businesses out of the cannabis industry wasn’t the supervisors’ intent when they asked staff for stricter penalties.

“Our intention is to get somebody to pay the tax,” he said. “I would hope that we could come up with something that is the intent of what we’re trying to do.”

There was already a 30-day grace period built into the county’s cannabis tax system, which the new amendments wouldn’t alter. Odermann said that if taxes are due on Jan. 1, businesses have to pay them by the Jan. 30 delinquency date, which is also when the report accompanying those taxes needs to be filed.

“We’re saying if you don’t do that by Jan. 30, then there’s the death penalty,” Odermann said.

Others agreed that the rules were a bit much.

“This is a standard that, like, nobody else lives by,” 1st District Supervisor Das Williams said. “Is there any other option? … Can people essentially prepay their cannabis taxes to be out of this quarterly jeopardy? … If our goal is remedy and better collection, then why wouldn’t we allow people to pay their taxes ahead of time?”

In 2020, a grand jury in Santa Barbara, California criticized the county’s cannabis regulations in a report, citing that members of the Board of Supervisors allowed cannabis businesses to dictate policy and failed to serve the interests of county residents. The grand jury, which serves as an oversight body for county agencies, wrote in the report that it had received several requests to investigate the actions of the board in relation to the creation of the county’s cannabis regulations.
 
Ah yeah....like CA doesn't have an uncontrollable illegal market due to...wait for it...high taxes and fees. So yep, let's add another fee. FFS

Santa Barbara County to add fee on Cannabis operators to pay for data access


Santa Barbara County Supervisors Pass First Reading of Cannabis Fee Addition Despite Dissent.


An ordinance amendment that will add another fee to cannabis operations was approved Tuesday on a first reading by the Santa Barbara County Board of Supervisors and will come back at the Aug. 29 meeting for final adoption.


The amendment was approved on a 4-1 vote, with 5th District Supervisor Steve Lavagnino dissenting, apparently over his objection to the cost of the service the new fee is designed to cover.


Under the new fee, cannabis operators who hold county business licenses would be charged 3% of the cost of renewing their state licenses, said Brittany Odermann, deputy county administrator who oversees cannabis regulations.


Proceeds from the fee would pay for the county’s participation in the California Cannabis Authority data analytics system, with cannabis operators to be charged starting in September for the second quarter of the fiscal year.


Odermann said the amount each operator pays will vary depending on the number and types of licenses held.


In May, when the board was considering changes to its cannabis business license fees, supervisors asked the staff to come up with a way for cannabis operators to pay for the county’s cost of participating in the data analytics platform.


The county joined the CCA data analytics program because the state had failed on its promise to provide counties with data from its Track-and-Trace system.


As an alternative, CCA collected the data, analyzed it and made it available to counties that subscribed to the system.


Santa Barbara County’s initial cost to join was $500,000 per year, and that fee was covered in the 2021-22 and 2022-23 years by the county’s cannabis taxes.


But that tax revenue has declined due to various factors primarily driven by a glut of cannabis on the market, which has driven down prices and forced some operators out of business.


Odermann said because of the reduction in data generated by the county, negotiations with CCA reduced the annual cost to $280,000, but the new fee would guarantee the industry would continue to pay for that annual subscription cost.


Lavagnino said he opposed the cost of joining CCA from the beginning because $500,000 was too much for the benefit received.


“I don’t think we get enough bang for the buck on this. I’m glad to see this might be the last year we’re doing this,” Lavagnino said, referring to a new state View Metrics function in its Track-and-Trace system that Odermann said would provide data to counties free of charge.
 
"Demand police action"? In CA? That's hilarious. But they did manage to arrest the owner of the grow.


'Do you want us to get into a gunfight?’ Cannabis industry decries police response to burglaries

Santa Cruz Cannabis Businesses Demand Police Action on Sophisticated Burglaries.


Local cannabis operations have increasingly become targets for highly sophisticated burglaries in which masked individuals break into these tightly secured shops and steal tens of thousands of dollars worth of product and cash, cause tens of thousands of dollars in damage, and get away in a matter of minutes.


Eight such burglaries have occurred within the city of Santa Cruz since last year, and businesses in Watsonville and unincorporated areas of the county have also been hit.


The escalating frequency of these incidents has drawn outcry from the business owners and growing public safety concerns from local officials. This was highlighted in November during an attempted burglary of Decibel Gardens on Encinal Street, the second such attempt on the grow and packaging business this year. Derek Hubbard, who owns Decibel Gardens, arrived before police and intervened, crashing his vehicle into one of the getaway cars and firing several gunshots at the burglars.


Multiple people in the cannabis industry saw in Hubbard’s actions a release of their own frustrations with local law enforcement, which has, to date, made no arrests related to the string of burglaries. However, law enforcement viewed the incident as reckless vigilantism that returned a property crime with deadly force. Police arrested Hubbard and charged him with assault with a deadly weapon, sending the local industry into a frenzy of organizing, publishing op-eds in local news outlets, calling out law enforcement and pleading with local officials for help.


“We need law enforcement, and we need law enforcement to respond and to catch the perps,” Chad Maxwell, CEO of 3 Bros, a local cannabis company, said. “We need them to stop sending the message [to thieves] that Santa Cruz is open for business.”


The city has taken notice. This week, industry stakeholders are scheduled to sit down privately with Mayor Fred Keeley, City Councilmember Sonja Brunner, City Manager Matt Huffaker and Police Chief Bernie Escalante for what’s being presented as a listening session. At the center of this meeting sits a fundamental disagreement between the industry and police over law enforcement’s ability to help prevent, investigate and prioritize arrests for these crimes.


Grant Palmer, CEO of CannaCruz, had his shop broken into in March. He said when police arrived, well after the burglary, they collected some information, but officers told him there was little they could do. After Santa Cruz Roots was broken into in April, CEO Troy Bookout said he got the sense from law enforcement that the burglary was his business’ fault for not having better security.


Palmer and Bookout said security footage from their break-ins, as well as footage shared in news reports following Decibel Gardens’ burglary, show the crimes are committed with a coordinated, masked team using multiple cars for loading and getting away. The burglars move quickly, and are often not on the property for more than 10 minutes. Bookout said in order to enter Santa Cruz Roots, the thieves had to break into two glass doors that were supposedly unbreakable, three other locked doors and cages, causing about $20,000 in damage.


Business owners are now talking about taking things into their own hands. “Do you want us to get into a gunfight with these people?” Palmer asked. Bookout said he could imagine himself in the same scenario as Hubbard, intervening with his car to block in the thieves. Maxwell, whose 3 Bros suffered $50,000 in stolen product, cash and property damages during a December 2022 burglary, said Hubbard did “what every one of us wants to do: protect our property and our livelihood.” Palmer, Maxwell and three other local cannabis business owners wrote in a Nov. 21 Santa Cruz Sentinel op-ed that “if these issues are not addressed, more business owners will likely feel more compelled to take matters into their own hands to protect their livelihoods.”


Escalante said he understands the impassioned desire to protect one’s property and business. However, returning what police see as unarmed thefts with gunfire or other deadly force is not justified, he said, and those who take such extreme measures will be held responsible.


“I empathize with the passions of ‘You’re not going to steal from me!’ but it needs to be measured and thoughtful,” Escalante said. “People need to let us do our jobs.”


Escalante said during the November burglary of Decibel Gardens, police were dispatched within 40 seconds of receiving the 911 call, were en route within 14 seconds and arrived on scene within 3½ minutes. “If that’s a failure,” he said, “I’m not sure I can meet their expectations.”


Despite what Escalante disregarded as the industry’s “stone-throwing,” he said his department is actively working on these crimes; however, he said they haven’t collected enough convincing evidence “yet” to make an arrest in any of the eight burglaries. He vehemently rejected the idea that police settle on a more lax approach to crimes against cannabis businesses, but said the industry is a target everywhere, not just in Santa Cruz.


“We will follow up with any case or evidence that has a high likelihood to lead us to a suspect; we don’t decipher which cases to work based on the type of business,” Escalante said. He said there have been “too many” of these burglaries in Santa Cruz, but that “these places are high-risk and target-rich environments.”


Frustrated by the lack of any arrests and priority from the local police, Palmer said earlier this year he and Hubbard hired a private investigator to build a case.


The investigator’s findings have convinced business owners that many of the burglaries are connected and being committed by a crime ring based outside the county.


Escalante told Lookout that law enforcement believes this as well; however, he said police still don’t have enough information to say for sure. Yet Escalante said he looked forward to receiving any new information the business owners could provide regarding the burglaries. The investigator identified some of the suspected thieves’ names and where they work, according to Palmer, who said they already turned this information over to the police.


Keeley said he expects this week’s meeting to result in some strategy changes by law enforcement, but does not see a need for the city council to involve itself as a policy-setting body yet. He said the police could view the areas around cannabis businesses as hotspots that earn extra patrols for the foreseeable future. However, he said the spirit of vigilantism inspiring some of the business owners will not help their case.


“If what happened [at Decibel Gardens] is OK, then why couldn’t you do it at Forever 21 if someone walks out with three armloads of clothes onto Pacific Avenue?” Keeley said. “I don’t think that’s how the law works, and I don’t think that’s the world we want to live in.”
 
This stupid....how they ever thought that they could get away with this under the current Schedule 3 listing is beyond idiotic.

And, CA's problems with their legalization program has zero to do with interstate sales and everything to do with how CA fucked it up and continues to fuck it up. If thye want to know the source of their cannabis program problems they just need to look in the mirror.

Apparently, they are desperate for a tax windfall to bail them out of their falling cannabis tax revenue and huuuuuge state budget deficit and thought this would be a solution. Nice try but no cigar.

California's latest attempt to save the legal Cannabis market just failed


California’s dream of selling cannabis legally across the country has gone up in smoke.


On Tuesday, state Attorney General Rob Bonta declared that allowing legal cannabis companies to export marijuana across state lines would result in “significant legal risk to the State of California.” The move effectively halts California’s attempt to open up interstate sales, which many had hoped could provide a much-needed boost to the state’s legal market.


Currently, California law only permits cannabis companies to sell their products within the state, because cannabis is illegal under federal law. Last year, the state government passed a law that would have created a pathway for interstate sales — but only if either the federal government explicitly condoned such sales, or the state attorney general issued a legal opinion declaring that allowing interstate commerce would not create a legal risk for the state or its employees. Bonta’s Tuesday letter, which was first reported by Marijuana Moment, has effectively quashed that effort.


Selling cannabis to other states has long been a dream of California’s legal industry. Both regulators and business owners hoped that selling their pot to other states would prop up the struggling industry, which is currently facing declining tax revenue and hundreds of business failures.


David Hafner, a spokesperson for the Department of Cannabis Control, said in an emailed statement to SFGATE that the agency is continuing to pursue the “visionary spirit” of the interstate commerce attempt but did not specify how the agency would move forward.


“We appreciate the Attorney General’s conclusion that the arguments supporting interstate agreements are ‘strong.’ Unfortunately, even strong arguments cannot put novel questions beyond all debate. If you are looking for certainty, you will not find it in cannabis,” Hafner wrote in an email.


Bonta’s opinion was the likely end of a multi-year attempt by Gov. Gavin Newsom’s office to legalize interstate commerce. The governor signed Senate Bill 1326 in September of 2022. It went into effect on Jan. 1, 2023, and within a month, the DCC asked Bonta’s office for a green light on interstate sales, arguing in an eight-page letter that existing case and constitutional law would shield the state from legal risk.


Bonta, who has long been a supporter of the state’s industry, called the situation “highly unusual” in his Tuesday opinion, writing that his office would normally not answer such a request. In his letter, Bonta did agree with the DCC that there are “strong arguments” for California being on safe ground in permitting interstate sales. Ultimately, however, he found there would still be a possibility of the federal government suing the state if it allowed such sales to proceed.


“We are not in a position to make political or economic predictions about whether the United States or another party would be likely to sue,” Bonta’s opinion stated.


Hafner, the DCC spokesperson, said that California will continue in its fight to allow the legal sale of cannabis across state lines.


“California has long been at the forefront of efforts to legalize and regulate cannabis, even in the face of legal and political uncertainty. We will continue—under Governor Newsom’s leadership—to search for ways to bring the cannabis industry market into a regulated framework that protects the public,” Hafner said in the emailed statement.
 

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