Santa Barbara County collected $3.1 million in cannabis cultivation and retail taxes through the second fiscal quarter, $10.5 million less than the original projections of $23 million.
“There’s been a decline in gross sales receipts, there has been a significant drop in wholesale pricing, and there’s a severe supply glut—there’s too much product in California and not enough outlet[s],” county planner Brittany Heaton told the Board of Supervisors during its March 14 meeting. “The price per pound, as an estimation, we saw prices drop 35 to 40 percent on average.”
Based on the second quarter filings, the county might expect a $7 million increase in the next two quarters, she said. However, the rate of increase won’t be as high as it was in previous years of the program—which saw a jump from $6.7 million in 2018-19 to $15.7 million in 2020-21, she said.
The county also had 12 operators leave the cannabis industry due a lack of capital, compliance issues, the application and licensing process, or attrition, she said.
On the other hand, 14 new business licenses were approved (now, there are 76 total), 14 cultivation operators are on the waiting list with 235 acres, and two retail stores opened in the unincorporated areas of the county with two more in the building permit process.
Cannabis taxes fund ongoing cannabis enforcement and its administration—which has 30 full-time employees—long-range planning, libraries, the 211 helpline, trail restoration efforts, and other community projects, according to a staff report of cannabis’s historical revenue and expenditures.
Lionel Neff, a board member for the Coalition for Responsible Cannabis, told the Sun that this program turned out to be “another broken promise.”
“For the last five years, we have had nothing but promises made, promises broken. Our entire county was sold on a cannabis program that was going to balance the issues of odor, traffic, and safety with substantial tax revenue,” he said in a statement.
The significant decrease in revenue also alarmed 2nd District Supervisor Laura Capps, who said during the meeting that it might be time to reexamine the county’s cannabis program.
“With revenues being way off—almost 100 percent from projections—that is a wake-up call for changes, a pretty loud and clear one,” Capps said. “The intentions were for the revenue, that’s the reason for this program. I’m curious about what tools we have within this body, within this board, to make the changes to make sure people are paying their taxes, paying their revenue, and the program we’re running to actually [work] for more people.”
She asked staff if it would be possible to segregate the Transient Occupancy Taxes (TOT)—a bed tax on hotels and short-term rentals that saw a $2 million increase—or property taxes ($17 million increase) in order to cover programs funded by the cannabis industry.
Fifth District Supervisor Steve Lavagnino responded by saying the cannabis tax program can’t get eliminated because it still funds 30 full-time employees and the law enforcement division—which are still needed to combat the illegal market and enforce legal regulations.
“If you get rid of the program, you still have the problem of you [now] don’t have the revenue to deal with it. Yes revenue is down, but since 2019, TOT has brought in $49 million to this county, cannabis has brought in $43 million to the county,” he said. “I don’t remember anyone coming in 2013, 2014 when TOT was down saying we should get rid of the TOT program.”
First District Supervisor Das Williams intervened and said that the supervisors were bringing “campaign issues” to the board, and requested that the supervisors stick to the agenda.
Capps responded to Lavagnino by saying that the revenue update showed that “the status quo” isn’t working and change needs to come in order to continue county operations, to which Williams responded with a question regarding her proposal to change the program.
“I would just wonder, and I think it’s a fair question, if revenue bounces back to $7 or $8 million, would you support the program if that logic follows through to whether it’s successful as projected?” Williams said. “Something to think about, I don’t need an answer immediately.”
The board filed the item 4-1 with Capps dissenting, and discussed the possibility of adding a cannabis policy and enforcement discussion to a future agenda.
This article appears in Mar 23-30, 2023.