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Now What?

Sonoma County cannabis industry faces new challenges after passage of Measure A

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SEEING GREEN  Passage of  a cannabis tax will enable local businesses to get licensed.
  • SEEING GREEN Passage of a cannabis tax will enable local businesses to get licensed.

Sonoma County's cannabis industry was split on support for the cannabis tax Measure A.

But its passage last week will help local growers and businesses get the licenses and state permits they need to emerge from the black market and make good on their investments, says Tawnie Logan, executive director of the Sonoma County Growers Alliance (SCGA), a trade group that opposed the tax.

The initial tax rate of up to 5 percent is expected to generate $6.3 million for the county's regulatory program. If the rate goes to the maximum 10 percent rate it would bring in $15.6 million. The maximum tax for cottage growers, $1,250 a year, is quite good, Logan says.

Getting a business permit and a state license are priorities for anyone with "skin in the game," she says. "If the tax measure didn't pass, there would be no business permits for the industry in Sonoma County."

And that would have meant waiting for the county to place another tax measure on the ballot or looking to the local cannabis industry to muster the approximately $300,000 to do it themselves. Either scenario would have left looking-to-go-legit cannabis businesses in limbo.

But now that it's passed (by 72 percent of the vote), Logan wants to see better and more frequent dialogue with the county and an effort to help the 2,000 growers affected by zoning changes that now prohibit them from cultivation on land zoned rural residential and rural agriculture.

"What we really need to address are the thousands of operators that are already here," she says. "That's what this whole thing is about. If the county just permits the big players, it's business as usual for the black market because there's no access."

She points to a progressive Humboldt County program that gives growers facing similar zoning changes ample time to retire out of the industry, a clear pathway to come into compliance and help with relocation to areas zoned for cannabis production and operations.

To help growers who can no longer grow in rural areas, her organization is exploring cooperatives made up of several small growers on one plot of land. But as a result of the zoning changes and the top-end 10 percent tax, some businesses are looking elsewhere, she says.

"They're shopping all the counties."

Santa Rosa, which recently approved an 8 percent cannabis tax on the June 6 ballot, looks better to many businesses, she says, arguing that a 10 percent county tax rate will be too much when state taxes and other fees are factored in.

Voters legalized recreational cannabis with the passage of Proposition 64 in November. It keeps large operations out, but that protection ends in five years. While a 10 percent tax rate is too high for small businesses, it may be too low if corporate entities like Philip Morris or Monsanto get into the pot business, Logan says.

"Five years from now, we're going to be dealing with a whole different set of players than we've ever dealt with," she says.

It will take a concerted local effort to keep those large-scale players at bay and defend local regulations, she says.

Even with the low tax rate, some growers hoping to make a go in the legal market face an uphill battle. "It almost pushes me out of the legal market because I'm so small-scale I don't know how I would be able to afford to stay in it the way it's being taxed," says a West County grower of the new taxes.

He says many growers his size feel like small organic farmers being pitted against large conventional growers.

"The tax per square foot is still going to put a lot of people out of business," he says.

Some growers are contemplating pushing for one more big season on the black market before they look for work with larger operations or get out of business altogether, he says.

For her part, 5th District Sonoma County supervisor Lynda Hopkins says she's eager to work with the industry on "phase two," the county's term for implementation of the tax and the regulatory regime. She says she recognizes the floating tax rate is a cause of concern, but that flexibility can be a benefit because it allows the county to adjust to changing conditions. She said zoning decisions can be reexamined again, too.

"That's easy to revisit," says Hopkins.

She says she's in conversation with the SCGA and other growers to find a way to support small-scale cannabis businesses, many of which operate in the 5th district she represents.

"I'm hoping to earn their trust."

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