Santa Cruz County is seeing a decline in its hashish trade, with tax revenues falling far in need of projections for the 2021-22 fiscal yr.
County officers say that present revenues of $1.68 million are lagging behind projections by greater than $1 million, and by $1.6 million for the earlier yr.
The County presently has 12 licensed retail places in its unincorporated space, together with 76 non-retail companies.
A complete of six hashish companies have closed over the previous fiscal yr, a development trade professionals say may proceed.
Colin Disheroon, who owns Santa Cruz Naturals in Aptos and its sister location in Pajaro, says that the rationale for the issue begins with a public cautious to spend in an financial system shaken by the Covid-19 pandemic.
“Individuals can’t afford to spend cash on costly hashish,” he says.
This drawback is compounded, he provides, by the taxes tacked on to authorized weed by state and native officers that add roughly 40% to the entire price on the register.
“When you’ve got 15% excise tax, you continue to have the cultivation tax, the manufacturing tax, the native 7% gross sales taxes, it’s all an excessive amount of,” he says. “All of these want to return down.”
A difficulty statewide for the rising trade, Disheroon’s sentiments are gaining traction amongst hashish enterprise homeowners.
In a letter late final yr to Gov. Gavin Newsom, Senate President pro-Tempore Toni Atkins and Speaker Anthony Rendon, 30 hashish trade professionals demanded that lawmakers work to cut back the taxes and to get rid of the cultivation tax.
“4 years after the beginning of authorized gross sales, our trade is collapsing, and our world management and legacy is on the brink of disappearing ceaselessly,” the letter reads. “It’s important to acknowledge that an unwillingness to successfully legislate, implement and oversee a useful regulated hashish trade has introduced us to our knees.”
The Santa Cruz County Board of Supervisors on Jan. 25 handed a decision requesting that Newsom and the State Legislature work to reform the tax construction and regulatory framework for the authorized hashish trade.
In his budget proposal in January, Gov. Gavin Newsom stated he’s prepared to contemplate modifications to the state’s tax construction. However such modifications to state taxes require assist from two-thirds of the Legislature.
“The Administration helps hashish tax reform and plans to work with the Legislature to make modifications to California’s hashish tax coverage to assist stabilize the market; higher assist California’s small licensed operators; and strengthen compliance with state legislation,” Newsom acknowledged.
And state officers seem like on board with these reforms, too. California Bureau of Hashish Management Performing Deputy Director of Exterior Affairs Christina Dempsey says the company is “dedicated to making sure significant pathways exist for California’s small, legacy and fairness licensees to thrive on this authorized market.”
Within the final yr, Dempsey says, the state consolidated three legacy packages into a brand new standalone hashish division, mixed three units of state rules governing industrial hashish exercise and awarded $100 million to assist companies’ transition to annual licensure by the Native Jurisdiction Help Grant Program.
The state has additionally distributed hundreds of thousands of {dollars} by the Hashish Tax Fund for “fairness and enforcement,” Dempsey says.
Disheroon says he helps “good regulation and good taxation.”
“But it surely’s bought to be life like, and the charges throughout the trade are unrealistic,” he says.
He provides that the Covid-19 lockdown additionally contributed to the issue, when the general public was consuming extra hashish merchandise.
Consequently, the trade ramped up manufacturing, solely to come across a serious slowdown, he says.
“They anticipated this development was going to proceed,” he says. “All of the sudden, the growers and producers have far more product than they know what to do with, they usually must pay to have that product processed.”
A lot of this extra product is being shunted into the black market, worsening an issue that Prop. 64 sought to deal with, Disheroon says.
County officers say that unlawful hashish operators additionally create unfair competitors by with the ability to promote their merchandise for much less.
This isn’t an issue in Santa Cruz County, the place operators are as a substitute destroying their additional or plowing their fields underneath, says Hashish Licensing Supervisor Samuel LoForti.
However LoForti agrees that the oversupply drawback is a statewide challenge, however says it’s also brought on by extra gamers getting into the market because the trade slowly takes maintain statewide.
Final yr, he says, many jurisdictions added licensing operations, resulting in considerably extra cover. Santa Barbara, for instance, elevated its cover by greater than 400 acres, he says.
“Increasingly more persons are getting into {the marketplace}, and that has tipped the scales,” he says.
LoForti says that these financial issues will not be shocking, and have been predicted in trade forecasts when leisure marijuana was legalized, which additionally foretold of independently owned hashish farms collapsing as market charges lower.
Nonetheless, he says the issue will ultimately enhance.
“I see market stabilization as an inevitability,” he says.
