HCGA Measure S Tax Policy Recommendation
Wednesday, February 14, 2018
Dear Humboldt County Board of Supervisors,
The significance of the Commercial Marijuana Cultivation Tax and its importance for the financial health of the industry, and along with it Humboldt County, cannot be overstated. It is critical that the County strikes the right balance between taxing the industry in ways that provide predictable and consistent tax revenue streams, and allowing cannabis producers the flexibility to make business decisions based on market conditions not the cultivation tax.
Currently, the manner in which taxes are levied means permit holders do not have the ability to decrease production below the full amount of square footage allowed under the permit in response to market conditions. If prices drop to a certain benchmark, the smartest economic decision for a cultivator may, in fact, be to reduce production i.e. allow a certain percent of permitted canopy to lay fallow.
However, under the current tax guidelines, there is no flexibility to make such decisions since cultivators are taxed on permitted area as opposed to cultivated area. As such, cultivators are pressed to maximize production in order to justify the associated taxes. This forces cultivators to grow their entire permitted footprint regardless of market conditions. This is inefficient from a business standpoint and worsens excess supply, a cycle that further depresses an already depressed market. Individual cultivators should have the opportunity to decide how much to grow based on their business strategy, not the de facto result of the tax structure.
The Humboldt County Growers Alliance (HCGA) respectfully requests that the Board of Supervisors give staff direction to amend Humboldt County Code Finance, Revenue and Taxation of Division I Chapter 9 Sections:
- 719-4 Imposition of Tax where it states, "regardless of whether land is cultivated or not" to allow for “fallowing” of the cultivation square footage and/or a portion of the square footage of one’s permit without losing the right to the entitlement.
- 719-6 Collection and Remittance to allow for collaboration between County Planning Department, Treasurer-Tax Collector’s Office, and the Agricultural Department. The Agricultural Department’s Track and Trace program, along with already sanctioned inspections, would be able to confirm the total square footage in cultivation in a given year.
By amending these sections, and any others necessary, we believe the County can develop tax policy that does not result in an increase in the amount of the tax or broaden the scope of the tax (which would require voter approval), and which would also go a long way towards reducing the concerns being expressed over taxes.
Since November, HCGA has been gathering input from our membership, analyzing Measure S and the strengths and weaknesses of the measure in search of relief points that could have an impact on our local operators without having to go back to the ballot, which is not feasible or recommended at this time.
HCGA understands the concerns of the industry members who spoke at the Board of Supervisors hearing on Tuesday, February 13, and commends the Board of Supervisors for listening. This is a very trying and uncertain time for those in the industry and those who are tasked with governing the County on this issue. We are committed to finding solutions that bridge the needs of all stakeholders.
Taxes have long been a source of angst, and helped fuel the birth of our nation. What’s new is that cultivators are now feeling the burden, and in doing so are being painfully reminded of Ben Franklin’s admonishment that death and taxes are two things one can always count on. HCGA is focusing on the future that lives in between.
Terra J. Carver, Executive Director
Natalynne DeLapp, Operations Director
Humboldt County Growers Alliance