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Once again today, the Humboldt County Board of Supervisors opted to cut the struggling cannabis industry some slack, voting 3-1 to eliminate taxation on next year’s cultivation and directing staff to explore options for an altogether new system of weed taxation that could replace Measure S, which voters approved in 2016.

Fifth District Supervisor Michelle Bushnell was forced to recuse herself due to her participation in the industry, but the matter still required three “yes” votes for any motion to pass. With the four participating supervisors workshopping measures on the fly, the deliberations descended into confusion before the board landed on a suggestion that the majority supported, with First District Supervisor/board chair Rex Bohn voting “no.”

The approved motion will also give growers a discount on their 2024 cultivation taxes, which come due next May. Following a suggestion from Third District Supervisor Mike Wilson, the board agreed to eliminate a built-in inflation increase of 23 percent, based on the Consumer Price Index (CPI).

That means the tax on this year’s cannabis gardens will drop back to the previously slashed rates of 10 cents per square foot of outdoor cultivation, 20 cents per square foot of mixed-light cultivation and 30 cents per square foot of indoor. (The original rates of Measure S were ten times those amounts.)

This isn’t the first time that the board agreed to lessen the burden on local growers as the statewide industry struggles from oversupply. In 2022, for example, the board responded to urgent pleas from local growers by agreeing to suspend Measure S taxes for two years. This past October the board reinstated the tax at dramatically reduced rates, starting with the current calendar year. At the time, the board also directed growers with outstanding tax debts to enter into payment plans with the county by March of 2025.

Today, Deputy County Administrative Officer Sean Quincey said there are roughly 1,000 cultivation permits still active countywide, and as of last month 771 of those are delinquent on their county taxes, owing a combined $11.97 million. Only 418 of those growers have signed up for a payment plan.

Quincey laid out a variety of options for the board, including a proposal to temporarily suspend taxes altogether for the smallest farms while taxing larger ones at 10 percent of Measure S rates. He noted that it’s very difficult in the current economic environment to predict revenue from weed taxation, but he ventured a “guesstimate” of less than a million if the board continued with the current, reduced rate and maybe half that amount if it adopted the proposal for a graduated billing structure.

Fifth District Supervisor Steve Madrone offered the most lenient terms to growers, even suggesting a program that would allow those in debt to surrender their permits in exchange for having all of their fees and taxes forgiven. He also suggested extending the payment plan deadline beyond March of 2025.

Fourth District Supervisor Natalie Arroyo said a lot of community members want more information about how Measure S revenues are being spent, and she voiced interest in exploring the idea of repealing and replacing the measure, possibly with one based on gross receipts rather than cultivation area.

Third District Supervisor Mike Wilson pushed back against Madrone’s proposal for a two-year suspension, saying, “I still believe that the general public is still pretty supportive of of some kind of cannabis tax in Humboldt County.”

The Humboldt County Growers Alliance, a cannabis industry group, put up its social media bat signal yesterday, calling on growers to turn up at today’s meeting and call for a two-year suspension of Measure S. Many did just that. HCGA Policy Director Ross Gordon, for example, cited results of an internal survey of local growers. 

“We distributed a survey in September looking at current market conditions,” he said. “About 107 cultivators responded. Of those cultivators, 85% said that since the board’s decision to totally suspend the Measure S tax in November 2022 things have gotten worse. Cultivators reported that average price per pound has dropped from $400 a pound to $350 a pound over the last year. … This is why we’ve asked for an additional two year suspension of the Measure S tax.”

Other growers called for “normalization” of the industry, by which they meant treating cannabis like other agricultural products in the state, which aren’t subject to cultivation taxes.

Grower Dylan Mattole said economic studies show that cannabis still generates hundreds of millions of dollars for the local economy, and he argued that Measure S taxes shouldn’t exist.

“We need to stay at zero so that we can keep in business and keep inputting well over half of billion dollars … into this economy,” he said.

HCGA Executive Director Natalynne DeLapp described an industry in economic free fall. 

“We are going to see more and more farmers going out of business, because you can only operate in the red for so many years before you file bankruptcy,” she said. “[A]nd everyone knows that taxing a struggling industry is the fastest way to crush it.”

Humboldt County Planning Commissioner Thomas Mulder called in during public comment, saying he’s among the cannabis cultivators who owes back taxes, though he’s trying to make payments. 

When the matter came back to the board, Madrone laid a variety of options on the table and eventually made a motion to suspend Measure S taxes for two years — the 2025 and 2026 calendar years, for which bills would be due in 2026 and 2027. 

Wilson remained resistant to slashing those taxes altogether. He suggested the idea of a flat tax to be assessed on all but the smallest-scale growers.

In a rare instance of agreement with Madrone, Bohn suggested laying off taxation for now, saying everyone seems to want a piece of the pie. “And if we want to have any idea of maybe having pie later, we’re going to have to support the cultivators,” he said. He joined Madrone in advocating for a two-year suspension.

The board tossed around some more ideas for a while. Wilson argued that growers’ economic woes have more to do with external market forces than local taxation, and he reminded his colleagues that voters approved taxation of the industry.

“We heard from one side today, but there’s definitely another perspective,” he said.

Both he and Arroyo expressed reluctance to suspend Measure S for two years, and so Madrone pulled his motion back before a vote was taken. He made a new motion to suspend the tax for one year and direct staff to return with options for repealing and replacing it. Wilson seconded the motion, but then Bohn said he’d rather see growers get a break on this year’s bills. 

Madrone then seemed to (perhaps subconsciously) incorporate Bohn’s suggestion into his already-made motion, later saying he would be unwilling to “amend” his motion to include any taxation of the current year. Wilson objected, saying that wasn’t the motion he’d seconded, and the conversation went sideways for a spell.

Arroyo was put in the awkward position of having to take a side, and she wound up agreeing with Wilson, saying she didn’t come into the day’s conversation thinking it would include re-litigating previously settled taxation decisions.

Eventually, Madrone withdrew his motion once again and made a new one. As noted above, it called for the elimination of Measure S taxes for the 2025 calendar year, plus a small reduction in taxes for the current year and a directive to county staff to bring back options to repeal and replace Measure S. Wilson seconded again. Bohn was dissatisfied with the lack of immediate relief for growers and thus voted “no.” The motion passed regardless.

Electric car battery pilot project

Earlier in today’s meeting, the board debated the financial implications of participating in a pilot project involving Nissan LEAF electric vehicles, some state-of-the-art bi-directional electric vehicle charging stations and the Redwood Coast Airport Microgrid.

Former Humboldt County Aviation Director Cody Roggatz, whose abrupt resignation remains a mystery, initiated this pilot project, which will see the county partner with PG&E, Nissan, Fermata Energy and the Schatz Energy Research Center to install bi-directional electric vehicle chargers at the Arcata-Eureka Airport. The two-year project is financed through a sub-grant award from Cal Poly Humboldt. (The primary funder is the California Public Utilities Commission).

As Schatz engineer Dave Carter explained to the board, these bi-directional chargers are unique in that they not only charge Nissan LEAF vehicles but can also export energy from the vehicle batteries back to the county’s facilities, which will help manage electricity costs and improve grid stability. 

“That is a very unique kind of leading-edge technology, [an] up-and-coming system that we’ll see a lot more of in the coming years,” Carter said. He went on to explain, “We will be able to use the cars to balance the frequency inside the microgrid when the microgrid is islanded,” that is, when it’s not plugged into the statewide electrical grid.

The matter was set to be approved without specific deliberation as part of the consent calendar, but Bushnell pulled it over cost concerns, noting that it will require money from the county’s General Fund contingencies during a budget crisis. (The General Fund is facing a $17 million deficit, per the latest projections.)

“I’m not feeling very great about it,” she said, noting that this project isn’t budgeted.

The pilot project requires the Department of Aviation to purchase one Nissan LEAF electric vehicle at $33,769 (a discounted rate) and to accept a loan of a second Nissan LEAF. The rest of the project, including installation of the bi-directional EV charging stations and software and cloud services from Fermata Energy, would be financed through the Cal Poly Humboldt sub-grant in the amount of $104,147.

Bohn was skeptical about the ability of two small car batteries to balance the microgrid, but Carter said they’re capable of generating 40 kilowatts, which is enough to extend the microgrid’s capabilities in an emergency.

“It’s a significant injection of energy in a worst-case scenario,” he said.

Bohn also questioned the utility of such tiny vehicles.

“You can’t get a shovel in a LEAF,” he said. “So we’re just going to have people drive up to the airport, look at it and drive back. There’s not going to be any repairs, weed eaters, any of that work done at the airports.”

Wilson defended the project’s value in keeping Humboldt County at the forefront of renewable energy development, saying, “I think we probably have the highest microgrid capacity per capita of any county in the United States.” And he said that bi-directional chargers will eventually allow the larger community to have more energy resilience, with electric cars serving as backup battery systems.

Bushnell remained wary, asking what will happen if the county doesn’t want to keep these LEAF-specific bi-directional chargers at the end of the program period. Carter explained that much of the circuitry to be installed will be compatible with other chargers.

When it came time to vote, Bushnell said, “I’m gonna vote yes. However, I have a lot of feelings about it.” She’s worried that it will cost the county money in the long run. Nevertheless, the board voted unanimously to embark on the pilot project.

So long, Jim Wood

Wood

Family dentist and former Healdsburg Mayor Jim Wood, who has been our District 2 representative in the California State Assembly for the past decade, has just two weeks left on the job before he’ll be succeeded by incoming Assemblymember-elect Chris Rogers.

Wood appeared in board chambers today to deliver some retrospective observations, offer some advice for dealing with the state legislature and bid fond farewells to county personnel. 

Wood recounted his work on legislation to extend seismic compliance deadlines for small rural hospitals, expand timber harvest plans to improve wildfire resilience, and address and restore sites that have been damaged by illicit cannabis cultivation.

He also emphasized the importance of communicating with state legislators to address critical local issues and said Rogers will continue work on important projects such as expanding the region’s “middle mile” broadband network here in “the most underserved district in the state.”

Wood warned that this year’s state budget will not be good, so we shouldn’t expect much in the way of extra resources from Sacramento. 

Each board member expressed gratitude for Wood’s work over the past decade, and at the end of the meeting they posed for a group photo. (Minus Wilson, who had to leave the meeting early.)