Cannabis Tax Debacle: Our $1.6B County Minimally Deserves Competence

After nearly a year of working on cannabis tax alternatives, our Deputy CEO finally presented her findings to the Board of Supervisors who are considering a November election Cannabis tax ballot Referendum. More disappointing than the presentation’s lack of depth, analysis or erudition was its shockingly obvious cannabis-bias. Allow me to explain:

There are only 18 other counties that allow Commercial Cannabis cultivation, so one would expect a comparative accounting that included each county, the amount of cannabis grown, the crop value (“tax burden”), the accompanying costs, and the method of taxation. Instead, we got a childish pro/con type Report (11-page deck/eight-page letter) that compared just five other counties and was not ultimately included in the public hearing documents. Suspicious, right? 

Among other things, the presentation attempted to show revenue parity (parody) between Monterey’s square-foot-grown tax and our self-reported revenue approach. Demonstrating a true “agenda,” however, it failed to mention the HUGE difference in the amount of cannabis being grown. For example, in 2021 Monterey grew just 117 acres of cannabis and generated $20M in revenue (4% of $484M Crop Value) vs. SB County that generated 30% less revenue with 6X more acres. Supervisor Bob Nelson immediately commented that the numbers were misleading (my word) because we “produce more cannabis than the rest of the counties combined.” When he requested the all-important number of cannabis acres by county, he was told that they were “back in the office.” Huh? The presentation showed a lack of respect for the intellect of our Supervisors and our county writ large.

Fun Fact: Per the Report, outdoor cannabis pays 6 cents per square foot, i.e. $2,613 per acre. How much is an acre of outdoor cannabis worth? Well – and this is NOT in the report – according to Sonoma’s transparent Crop Report it’s $822K, which is why Sonoma receives $43,317 per acre!

Shockingly, the word “cost” never even appears in the report (This is finance, right?). Monterey, for example, employs 28 FTE’s across 10 agencies with a total cost of $6.3M. Supervisor Laura Capps asked: “How much money does it cost to administer our program” and whether staff looked at the alternatives “through this prism.” The answer was “no.” Can someone on the Board please come unhinged!

What made the presentation surreal was the recommended path forward – there was none. This, after a year of work from an Executive Office with a $65M operating budget and a 47-person Tax Department where no one even bothered to attend/present. Sadly, even whole departments don’t respect our elected Supervisors.

There was also a troubling and constant refrain that we might lose growers if we increase taxes, which just underscored the lack of available financial grower data in the report. One of our growers, for example, has $348M in assets on their balance sheet. Fun Fact: 90% of our total permitted acreage is outdoors, yet these acres produce just 15% (my guess) of our paltry $6M annual revenue. Why are we doing this? Why is staff so cannabis-protective? Is it job security?

Frankly, the bias was so palpable that I took the liberty of checking for staff Form 700 filings. These filings are Senior Staff required and show any outside income/consulting fees. Well, guess what, the county site showed “Data Not Found” for anyone in any date range, i.e., it was not working! How much do we pay for IT and does anyone even check this stuff?

Elections are meaningless if staff ultimately directs policy. Certain Supes are earnestly searching for answers to a failed ordinance. In order to succeed, however, they need to lead staff and not be led by them. 

My advice: Stop with the overly polite deference and demand unbiased
competence!  

Jeff Giordano, SB County Resident