SALINAS — After the Monterey County Board of Supervisors lowered its cannabis cultivation taxes earlier this year, the board will receive a report Tuesday on focus groups on the cannabis industry commenting on the county’s legal cannabis program.
County staff from the cannabis program scheduled 12 meetings in April, which included applicants that are currently operating in the county and those that plan to become operational within the next year. A total of 65% of the industry participated in these meetings. The county staff participated in a separate meeting with industry attorneys, agents and consultants.
Commercial cannabis operators told the county they are frustrated with the current compliance inspection process because they experience frequent inconsistencies between inspection staff, explaining one inspector will call out a violation that another will not. The operators said there is a significant cost for them to obtain permits and complete construction required to cure violations.
The cannabis operators told the county customer service expectations and service levels need improvement, including but not limited to, standardized response times and tracking mechanisms for accountability. Many of the operators suggested the county create a case manager who could be assigned to each operator to work with them on compliance, requirements, navigating county departments, and answer questions and ensure timely turnaround of work and reporting.
The operators said they believe there is parity between them and traditional agriculture and the county’s approach to regulating both industries should be similar. Operators said they believe that the rigorous application of regulations to an emerging industry is affecting their ability to remain in business in Monterey County.
As of March 31, cannabis cultivation rates per square foot were reduced from $5 to $3 for mixed-light, from $8 to $7 for indoor and from $2.50 to $1 for outdoor cultivation. The distribution tax was reduced to 0% of gross receipts. However, the industry officials said they do not believe it was enough to remain competitive with the black market. The operators agreed that the tax burden primarily lies at the state level, but said there are opportunities to provide and maintain relief locally.
In a proposal made to the Legislature last week for the budget year that starts in July, Gov. Gavin Newsom recommended eliminating the much-despised cultivation tax, which is set at $161 on a pound of cannabis. But to make up for those lost funds, the state after three years would raise the excise tax imposed on retail cannabis purchases to 19%, up from the current 15%.
In addition to the report on focus groups, the Board of Supervisors will receive a report with recommendations from consultant Citygate & Associates on the county’s cannabis program. One of the many recommendations was for the county to create a cannabis permit dashboard report that illustrates the moment-in-time status and aging of an active cannabis business permit in process linked to the active precursor steps to obtaining that specific cannabis business permit, such as planning, building, and code enforcement permits and activity.
