Mayor Aristan Julian believes cannabis is the answer to Guadalupe’s long-running general fund revenue problems—4 to 6 percent of gross receipts from future dispensaries ought to do the trick, he said!
“If they make $3 million, we could get 6 percent of that into our general fund,” he said of the three cannabis businesses the city recently approved to open.
But you know what sucks about anticipation? Disappointment.
What if they make $300,000 or $30,000 or $300 or $0. Guadalupe also gets 6 percent of that! But cannabis is such a gold mine! Well, apparently, not all the time.
Santa Barbara County seems disappointed with the amount of money it’s bringing in from cannabis cultivation taxes—4 percent of gross receipts is a more volatile revenue stream than it anticipated. County Executive Officer Mona Miyasato said the county was as much as 30 percent off in its predictions for this fiscal year, overestimating its haul from the cannabis industry and disappointing all the county departments depending on that stream.
In 2019-20, the county pulled in $12.2 million from cannabis taxes; $15.7 million in 2020-21; and as of the second quarter for 2021-22, $5.4 million. That’s about $1.4 million less than the same time period in 2020-21. It still sounds like a lot of money to me, but not if you’re expecting to make money off of all the acres under the county’s cannabis cultivation cap and less than a third of those acres are actually producing cannabis and the price cannabis farmers are getting for their trouble has fallen from a high of about $1,500 per pound in October 2020 to about $800 per pound in April 2022 (according to The Sacramento Bee).
That’s a lot less revenue to tax.
So what’s the solution to prevent the market from strangling tax revenue?
Nothing that seems to be any better at the moment.
The state is currently charging cultivators a flat tax of $161 per pound, which is almost 20 percent of their revenue if you take April’s prices into consideration. In addition to that, the state also charges a 15 percent excise tax as well as a sales and use tax. Cannabis cultivators also have to pay local taxes, such as Santa Barbara County’s 4 percent of gross receipts.
According to a commentary in CalMatters, some California cannabis farmers are choosing to return to the black market or let crops rot in the fields rather than lose money on their harvest. The commentary advocated for the state to reform its tax policies, something Santa Barbara County 2nd District Supervisor Das Williams seemed to also want, according to his comments at the board’s April 14 meeting.
The board was discussing cannabis tax reform at the county level, and Williams warned against making the same mistakes that the state made. Fifth District Supervisor Steve Lavagnino is on the same page. He called the state’s flat tax “ridiculously high right now,” because it doesn’t adjust to the market.
While the county’s tax does adjust to the market, it’s also held hostage by it. And as the dollar signs in government’s eyes about the budding new cannabis industry start to fade, what’s the answer?
I have no idea. And neither does anyone else.
The Canary is waiting for a new industry to hit its teen years. Send comments to canary@santamariasun.com.
This article appears in May 5-12, 2022.
