Santa Barbara County collects first pot taxes while tightening enforcement

It’s still a long and windy road before commercial cannabis regulations are set in stone in Santa Barbara County, but officials are already seeing dividends in the form of tax revenue. 

According to Assistant CEO Dennis Bozanich, the county’s lead on cannabis enforcement, compliance, and regulation, around $1.8 million in taxes were collected from 30 pot growers between June 30 to October 31 of this year. 

He said the numbers fall in line with projections given to the county in December 2017 by consultants and staff about what the county can expect to collect from its nascent cannabis industry.

At the Santa Barbara County Board of Supervisors meeting on Nov. 13, Bozanich informed the supervisors that the majority of cannabis operators had yet to submit taxes. Out of the 96 state-licensed operators in the county, 41 stated they had no gross receipts during the June to October time window, while another 31 did not submit reports at all. 

Bozanich attributed the lack of reporting to the timing for outdoor cultivation sites, which harvest and process their product in October. Around 75 percent of all cultivation sites in Santa Barbara County are of the outdoor variety, he said. 

“It wouldn’t be too surprising that they [county cultivators] hadn’t had any sales from product that they had just harvested given the processing and drawing times,” Bozanich added. 

The report delivered to the supervisors on Nov. 13 also revealed a growing trend in the county: The number of active state-issued temporary cultivation licenses had dropped from 1,289 in July to 832 in October. The drop in licenses also brought down the estimated total acreage for growing pot from 315 acres to 196 acres countywide. 

According to Bozanich, the vast majority (around 70 percent) of all marijuana cultivation is occuring in the Lompoc and Santa Ynez Valley areas. 

He said the numbers for licenses and acreage were dropping for a few reasons. One contributing factor is state licenses, once easy to obtain in the early phases, are now harder to get and come with more requirements. 

“I think a lot of cultivators sought and received initially those temporary licenses because they were free and they were easy to get,” Bozanich explained. “You didn’t have to submit a lot of forms or you didn’t have to provide any real backup data. It was kind of like, ‘Fill out the online form, have a pulse and respiration rate, and you’re good,’ to get a temporary license.”

And because the state temporary licenses were free, many growers applied for ones they didn’t necessarily need to give themselves more flexibility when choosing how much to grow. Now that cultivators have had time to assess their operations, they appear to be letting many of the extra licenses expire, according to county enforcement officials. 

Add those conditions with a change to state regulations in June that now requires growers to submit maps of their sites and go through an approval processes with Regional Water Quality Control Boards as well as state Fish and Wildlife, and the drop in licensing countywide begins to make sense, Bozanich added. 

“I think what you’ll see here is the October numbers in terms of active licenses, parcels and acres, is a much more realistic picture of what the active industry is at in the county at this time,” he said. “That might also mean that next quarter the gross receipt numbers will be significantly higher because that cannabis [harvested in October] would have moved into the market.” 

County staff and supervisors also pointed to enforcement as probably moving the regulatory needle in the right direction. 

As of Oct. 31, the Sheriff’s Office Cannabis Compliance Team had initiated 10 enforcement actions against unlicensed cannabis operators. The result thus far has been one arrest for perjury and the destruction of more than 400,000 plants worth an estimated $88.9 million in the unlicensed market.

Additionally, the county’s Planning and Development Department has opened 30 additional enforcement cases. At least nine county-issued notices to address cannabis cultivation violations and cannabis-related zoning and building code violations have been sent, according to Bozanich. 

“Most of these violations are the result of operators not having valid state licenses or the use of lights and hoop [houses],” Bozanich said. 

The county hopes to address its hoop house issue with a draft ordinance that will be brought in front of the board on Dec. 11. After that, enforcement agents and staff should have a clearer idea of who is following state and county regulations and which growers are in violation.

This article appears in Nov 22-29, 2018.