High cost of business: Small-plot cannabis grower struggles to prevail
Small plot cannabis growers battle big bureaucracy
Despite being legal in many states, marijuana presents a classic David-versus-Goliath case for many Nevada County growers who plowed into the industry after the county in May 2019 approved rules for the crop.
Daniel Fink, an organic farmer in North San Juan, was the 12th permitted cannabis business in the county. Under the county’s regulations for a micro-grower with a 5- to 10-acre farm, he is allowed a 2,500-square-foot canopy of cannabis. His grow consists of 1/16 of an acre — equal to about one half of a basketball court.
“I’m the first person in the family to farm — my family were teachers and scientists,” said Fink. “But under the new ordinance, there is a new paradigm open to cultivators, distributors and dispensaries. But cultivators no longer have direct access to consumers. As you go up the commercial food chain of cannabis, taxation is added, which reduces profit to the cultivator, yet the price to the consumer goes up.”
Fink is one of the few local, permitted growers, according to a recent Nevada County Civil Grand Jury report. In that report, the grand jury stated that of the many cannabis cultivators in the area, only 3% were permitted, meaning an estimated 3,500 to 4,000 growers are out of compliance.
A key recommendation of the grand jury was to streamline the process — which would lower the high cost of entry into the market— and persuade many illegal growers to come into compliance.
Diana Gamzon, executive director of the Nevada County Cannabis Alliance, said the probability of a cannabis farmer succeeding in a volatile market are stacked against a small-scale grower. Becoming a regulated cannabis farm is different from launching a traditional crop farm, because cannabis farms are regulated as commercial enterprises and not agricultural ones.
“On top of the costly commercial regulations, cannabis farms do not have affordable options for crop insurance and cultivators do not qualify for traditional banking loans due to federal prohibitions,” she said. “Aspiring cannabis farmers need to have a solid business plan, a financial proforma (financial reports based on hypothetical scenarios that use financial projections), and the wherewithal to understand the complexities of the highly regulated, competitive and uncertain cannabis market.”
Despite all the variables, Gamzon praised the county’s nearly 250 small, independent cannabis farms that have either received a permit or are in the process. Cannabis tax revenue has already surpassed nearly $280,000 for this year.
Early under Proposition 64, nobody was allowed more than 1 acre or multiple 1-acre permits, said Fink. But that acreage cap was soon struck down and numerous corporate-scale farms were set up in Santa Barbara, San Bernardino, the Central Valley, Lake County and Humboldt County.
“But we are not regulated as farms but as commercial businesses operating in rural areas that require commercial road access and commercial building permits,” Fink said.
What that means is, for a tiny farm such as his, it can be upward of $100,000 to put in a commercial building, as well as a septic tank, and thousands of gallons of fire suppression water storage. Meanwhile, commercial road access can wind up requiring a road 20-feet wide. That means there’s a limit to many micro-farmers’ viability to operate as a business.
Jeff Merriman, Nevada County Code and Cannabis Compliance Division program manager, disputes some of Fink’s assertions. He noted after a review of Fink’s project there is no requirement for a septic tank. That is usually a requirement when an applicant is proposing to have employees on site as part of the commercial operation. And he explained why there was a need for water storage.
“Water storage is required for all commercial structures not served by a municipal water system,” said Merriman. “The purpose of storage is to ensure there is enough water available to suppress and defend the structures on the parcel.”
Concerning building costs, Merriman said overall costs depend on what each applicant proposes. He also pointed out fire is a major concern in the county and the local fire authority requires commercial projects meet commercial standards. And he added it is to assure the safety of the community and the applicant.
“Construction costs are up 200% from a few years ago,” he said. “So that has an impact on construction costs as well. We follow state building code and do not have any special requirements outside of what is required by the state.”
Fink’s concern of a suitable access road was explained as necessary not only for typical access but also for emergency vehicle ingress and egress, to allow fire trucks proper clearance to access a specific parcel in the event of a fire, Merriman said. He recommended applicants take advantage of the county’s planning consultation service for anybody thinking of going through the cannabis permitting process.
“This allows applicants to bring in their proposed project and receive feedback on requirements and potential costs,” Merriman said. “This is something that should be more utilized as it gives applicants a clearer picture of expectations. We are always here to answer questions and help applicants get through the process as quickly as possible.”
Fink arrived in Nevada County from upstate New York via Lake County, where he operated as a medical cannabis cultivator under Proposition 215, passed in 1996. For the past 10 years his farm has operated as a no-till, regenerative and sustainable method of operation.
Regulation overreach is squeezing many micro-farmers, Fink said. Throughout his professional life he was driven by a passion to organically grow a higher grade of medicinal cannabis for people who appreciate it.
“My model is driven by environmental consciousness, not profit,” he said.
Fink expressed a desire for the county to adopt event licenses. These would work similarly to a farmers market, allowing direct consumer access and bringing recognition of Nevada County-branded cannabis, and tax revenue, through tourism.
“Having our own brand out there is a way to maintain our place in a turbulent market,” he said. “Supporting small farmer local brands will make all the difference.”
William Roller is a staff writer with The Union. He can be reached at firstname.lastname@example.org
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