ERICH PEARSON IS CO-OWNER OF PEACE IN MEDICINE IN SEBASTOPOL AND SANTA ROSA AND SPARC IN SAN FRANCISCO.
I operate Peace in Medicine and SPARC cannabis dispensaries located in Sonoma County and San Francisco, respectively. Our organization also farms cannabis indoors, outdoors, and in greenhouses. For nearly 20 years now, our team has included approximately 150 employees, many of whom call Sonoma County their home.
We owe our success through an ever-changing landscape to our close adherence to best practices and an open dialogue with policymakers. We also value our relationships with patient advocacy organizations such as Americans for Safe Access, industry associations such as Sonoma County Growers Alliance and local farming experts like Mike Benziger and Phil Coturri. These collaborations allow us to shape the principles and regulations affecting the future of our operations.
The cannabis industry is at a crossroads in the United States and especially right here in Sonoma County. The state adopted a host of new laws, voters last week approved Measure A, and the task of regulating an enormous underground market is at our doorstep. Sonoma County officials have conducted thoughtful analysis and adopted a progressive plan for local regulation of the industry. Unfortunately, the cannabis business tax that was approved with Measure A in Sonoma County on Tuesday was expedited and its details have the potential to ruin even the most sophisticated cannabis businesses.
I did not oppose Measure A. I understand regulation requires taxation. However, the Board of Supervisors needs to set a rate that businesses can afford to pay. Unfortunately, the proposed cultivation rates by square footage easily result in a majority of a business’ profits being paid to the local tax. As a result, legal cultivators are reconsidering Sonoma County as a viable option for growth in the new marketplace.
Sonoma County is an exporter of cannabis, thus tax rates need to consider the macro economics of a statewide industry. Current planting of millions of square feet of cannabis in once-abandoned nurseries from Salinas to San Luis Obispo is a wakeup call to our industry and lawmakers. Today’s medium size cannabis farmer is, at best, tomorrow’s small farmer.
Overproduction is already causing prices to crash and margins to thin. Fixed per-ounce harvest taxes levied by the state and local gross receipt taxes set at yesterday’s margins will put legitimate, job-producing cannabis businesses upside down in short order. If the economics don’t work, then there is no sense implementing a regulatory program because no one will sign up. Moreover, a tax policy that stymies participation will fuel the unregulated market, and Sonoma County’s neighborhoods will continue to suffer the consequences.
It has been suggested that jurisdictions including the counties of Monterey, Santa Cruz and Mendocino have proposed similar rates. It is a deceptive argument because there are important distinctions in law. Monterey County banned outdoor cultivation. Santa Cruz does not require a costly conditional use permit, opting instead to review applications administratively.
And, Mendocino County set an initial tax rate of 2.5 percent on gross receipts, which may be raised by that county’s Board of Supervisors starting in 2020 in 2.5 percent increments up to a maximum of 10 percent.
The good news is there is still room to negotiate a fair and equitable rate. I remain encouraged by the Board of Supervisor’s willingness to work with the industry to adopt reasonable pathways forward.
Measure A provides an opportunity to continue our collaborations and deliver a tax policy that encourages participation, keeps local farmers competitive across the state and supports Sonoma County’s bio-diversity, family farmers and best practices.
I am keeping an open mind on the implementation of the cannabis business tax and encourage the Board of Supervisors to consider the potential negative impact establishing a high tax rate will have on their stated goals.
Erich Pearson is co-owner of Peace in Medicine in Sebastopol and Santa Rosa and SPARC in San Francisco.