County supervisors will vote on another tax break for cannabis growers - who say it’s still not enough.
The Board of Supervisors is scheduled to vote on another tax break for Monterey County cannabis cultivators, who are struggling amid challenging market conditions that have forced many to scale back operations – if not shut down entirely.
On Tuesday, Jan. 24, the board is scheduled to vote on a revised business tax structure for cannabis growers, who have lobbied for a lighter regulatory burden in the wake of an industry downturn. The lower tax rates – which would fall to $1.46 per square foot per fiscal year for mixed light cultivators, who comprise the large majority of growers in Monterey County, from $3 per square foot previously – come after the board previously approved a similar tax break last March.
Despite a boom in production that has seen cannabis become the third-most valuable agricultural product in Monterey County – total production value eclipsed $618 million in 2021, up from $484 million in 2020 – growers have suffered from declining market prices. Industry participants cite overproduction, and a lag in new dispensaries to absorb that crop, as key factors behind the industry’s headwinds.
Joann Iwamoto, program manager for the county’s cannabis program, says 15 cannabis businesses closed shop in 2022, taking the total number of shuttered operators to 35 since 2019. “It is a difficult industry right now,” Iwamoto says.
In turn, many cultivators have found themselves behind on unpaid taxes to the county, and have pleaded with regulators for interventions like a temporary tax freeze.
“How can we pay a tax when we’re not making any profits on what we’re selling?” says Michelle Hackett, CEO of Salinas-based cannabis cultivator Riverview Farms. In addition to declining crop values, Hackett cites the higher cost of soil, fertilizer, fuel and other operating expenses as compounding the issues faced by growers.
“The county knows we’ve been selling at or below our cost of production, yet they want to continue collecting a tax… Now they think they’re doing us a favor while we’re still fighting for our lives,” she says.
The revised tax structure would see the county’s projected tax revenues from cannabis cultivation decline to $5.26 million, from $7.25 million, for the 2022-23 fiscal year. That would still be enough to offset the county’s costs of administering its cannabis program, yet would diminish the amount contributed to other county programs.
That dynamic gives pause to officials like Supervisor Wendy Root Askew, who says that when Monterey County residents voted to legalize cannabis in 2016, they did so with “very real expectations… about the ways that there would be public benefit from the taxation of cannabis.”
Askew says that while she is “comfortable proceeding with the direction to bring the taxes down”, she is also mindful of “my responsibility to uphold the will of the voter” and would be less willing in the future to support lower cannabis taxes “beyond this moment of crisis – unless the public provides other direction.”
