Post-legalization, cannabis industry loses luster
The legalization of pot has changed California’s landscape, literally and figuratively.
The profit margin between cannabis cultivation and the permitting process has decidedly narrowed since the 2016 passage of Proposition 64, according to Nevada County’s long term legalization advocates.
Diana Gamzon, executive director of the Nevada County Cannabis Alliance, estimated the total permitting cost to one farm she worked with this past year at $50,000.
Longtime medical cannabis advocate Wade Laughter said that for some, the price tag of going legal after all the farm’s infrastructure is up to code could read closer to $250,000.
“Everything has to be permitted,” Laughter said. “All the buildings — the greenhouse has to have a permit, the road has to have a permit — everything has to be up to fire safe standards.”
Laughter, who cultivates CBD-dominant strains, said his advocacy has never been rooted in profit, but the falling cost of flower combined with the bureaucratic hurdles to “getting legit“ are not viable for the average farmer.
“There are all these requirements that have nothing to do with a garden,” Laughter said. “A cannabis farm is a commercial enterprise, like a gas station or a Walmart.”
Laughter said it is frustrating to watch the industry grow hostile to small-time entrepreneurs because of the altruistic intention that fuels his own vocation — connecting those in need with plant medicine.
“All my work was donation-based,” Laughter said of his time connecting patients with peripheral neuropathy and varying degrees of autism to cannabis through the Caladrius Network. “Most cannabis grown on my farm were made into tinctures, edibles or suppositories and given away at no cost. It seems unfair to me to put a price tag on most of the people determined enough to find me and ask for my help. The medical system had already taken their money.”
Laughter has taken his advocacy to Sacramento before, to speak particularly with and on behalf of Forrest Hurd who said locally grown CBD abated symptoms of his son’s intractable epilepsy, caused by the Lennox-Gestault syndrome.
“There are a whole range of conditions that cannabis seems to help,” Laughter said. “I say it like that because I don’t like claiming things, but I have, over the years, seen dramatic improvements when we find the chemistry that works for someone’s individual needs.”
Even with the steep cost of legalization, Laughter said as an advocate for the plant’s medicinal benefits — particularly with the terminally ill — he would pursue a permit if his farm’s physical parameters did not immediately disqualify his property.
Laughter said he checked with attorneys to maintain legal status amid rapidly changing legislation — enactment and enforcement — between 2016 and 2018, while cultivating and distributing CBD strains for free.
Even after three of the five current Nevada County supervisors — Heidi Hall, Ed Scofield and Sue Hoeck — visited Laughter’s property off of Idaho-Maryland Road, the advocate’s property was automatically disqualified from a commercial cannabis license because the land falls in Res-Ag zoning.
“It’s not because (the industry) is dangerous or filled with criminal activity,” Laughter said. “It’s because some neighborhoods with Res Ag zoning came out strongly opposed. Politics is a business of finding compromise.”
Laughter’s property is also not wide enough to qualify for commercial growing, he said, so even if Laughter lived elsewhere on a parcel with similarly narrow dimensions — “my property is not quite 200 feet wide” — it does not meet the 2 acre minimum.
According to Nevada County Chief Fiscal Officer Martin Polt, the county spent “a lot of money” over three to five years to advance efforts for licensed cultivation in Nevada County.
Polt said the county invested “significant dollars” to develop the licensing program, including dedicated staff devoted to the planning and building aspects of the legalization process, as well as cannabis compliance units.
Polt said he couldn’t pinpoint the total amount invested to develop the program, citing the complexities between overlapping and separate responsibilities of cannabis code enforcement and the county’s planning department.
Beyond that, Polt said, Grass Valley and Nevada City are responsible for permits and procedures for both cultivation and distribution in their respective municipalities.
“Nevada City uses our planning and services department, but they reimburse us,” Polt said. “The infrastructure is somewhat different for each of the jurisdictions.”
Polt said the county offers some infrastructural support, but each jurisdiction must develop its own regulations and ordinances.
Barry Anderson, management analyst with the Nevada County Executive Office, said $1.9 million is the cost to the county thus far for legal operations.
“The county General Fund has invested $1.9 million, beginning in fiscal year 2018/19 through the current fiscal year, to get the cannabis compliance division up and running,” Anderson said. “That does not include any costs associated with the tax revenue measure.”
“I‘m not saying we’re going to recover the costs,“ Polt said. ”We have not caught up by any means …. It’s more than a drop in a bucket.“
Polt said identifying the concrete costs to public agencies committed to local legalization is challenging because the cannabis industry engages different county resource realms that offer support and monitor the industry.
Josh Merriman, with county Cannabis Compliance, said the county began issuing permits and collecting fees in 2019 when the program started.
Merriman said the fees attached to the permits pay exclusively for the staff’s time.
“There are no official fees besides time,” Merriman said. “The staff time is billed at an hourly rate.”
Nevada County has one of the lowest fees — if not the lowest — to get an administrative development permit for up to 10,000 square feet of cannabis, Merriman said. Smaller sites seeking commercial cannabis permits have a “faster turn around time.”
Upon inquiring into similar processes in Yolo County, Merriman said he found the agency charged $40,000 for the permit with a $9,000 annual fee.
“Our annual fee is $900,” Merriman said.
Laughter said a Nevada County farmer seeking legitimacy will pay less than cultivators in other counties because the latter must pay for the county permit and the state license separately.
“Once you get a permit, you have to get a license from the state,” Laughter said. “That’s a whole other level of difficulty.”
Nevada County supervisors conducted a countywide environmental impact report in 2018, Merriman said, which gave way to an ordinance offering an umbrella state license eligibility to permit grantees.
“Other jurisdictions require a conditional use permit,” Merriman said, adding that a site-specific analysis required with the permit application is usually lengthy and expensive. “We did a countywide EIR, so we have a cookie cutter ordinance streamlined.”
Laughter noted that a Mendocino farmer trying to legalize his business would pay thousands of dollars more than a cultivator in Santa Barbara, one of the few other counties with a similarly inclusive ordinance.
“Look at with the Idaho-Maryland Mine,” Laughter said, referencing the lengthy process required for Rise Grass Valley to reopen gold mining operations on two properties zoned for light industry. “Imagine if each farm had to do that.”
A Nevada County Grand Jury Report issued in May 2021 estimated 3,500 to 4,000 “illegal grows“ in operation.
According to Merriman, administrators have received 239 permit applications to date. One hundred fifty-five have been approved so far, Merriman said, and the remainder remain in various phases of the review.
“If you don’t have a permit and a license, you can’t operate,” Laughter said. “That’s why Nevada County is seeing an explosion here — you can legally operate in the cannabis marketplace.”
Rebecca O’Neil is a staff writer with The Union. She can be reached at firstname.lastname@example.org
Costs incurred to the county
Cannabis business taxes collected:
FY 19/20: $88,000
FY 20/21: $474,000
FY 21/22 estimated: $450,000
Permit revenues collected:
FY 18/19: $30,000
FY 19/20: $72,000
FY 20/21: $120,000
FY 21/22 estimated: $95,000
Fines/Penalties revenue collected:
FY 19/20: $99,000
FY 20/21: $422,500
FY 21/22 estimated: $250,000
Costs to operate
Total operational costs:
FY 18/19: $590,000 – This includes costs for a countywide EIR
FY 19/20: $492,000
FY 20/21: $559,000
FY 21/22 estimated: 783,000 – This includes the addition of 2 full time staff to assist with workloads
The first steps toward renovating the site of Grass Valley’s lone cannabis dispensary will come next week.
Support Local Journalism
Support Local Journalism
Readers around Grass Valley and Nevada County make The Union’s work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.
Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.
Your donation will help us continue to cover COVID-19 and our other vital local news.