After legalization, the cannabis industry loses its luster
The legalization of pot has changed the Californian landscape, literally and figuratively.
The profit margin between growing cannabis and the licensing process has narrowed markedly since Proposition 64 was passed in 2016, according to long-term legalization advocates in Nevada County.
Diana Gamzon, executive director of the Nevada County Cannabis Alliance, estimated the total cost of permits for a farm she worked with last year at $50,000.
Wade Laughter, a longtime medical cannabis advocate, said that for some, the price to pay to become legal after all farm infrastructure is up to code could approach $250,000.
“Everything must be permitted,” Laughter said. “All buildings – the greenhouse must have a permit, the road must have a permit – everything must comply with fire safety standards.”
Laughter, who grows CBD-dominant strains, said his advocacy was never rooted in profit, but the falling cost of flowers combined with bureaucratic hurdles to “go legit” aren’t 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’s been frustrating to see the industry become hostile to small entrepreneurs because of the altruistic intent that fuels his own calling – connecting those in need to plant medicine.
“All of 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 of the cannabis grown on my farm has been made into tinctures, edibles or suppositories and given away for free. It seems unfair to me to put a price tag on most people determined enough to find me and ask for my help. The medical system had already taken their money.
Laughter has already taken his advocacy to Sacramento, speaking in particular with and on behalf of Forrest Hurd who said locally grown CBD eased the symptoms of his son’s incurable epilepsy, caused by 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 to state 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 high cost of legalization, Laughter said that as an advocate for the plant‘s medicinal benefits — especially to the terminally ill — he would apply for a permit if the physical parameters of his farm did not immediately disqualify his property.
Laughter said he consulted with lawyers to maintain his legal status amid rapidly changing legislation — enactment and enforcement — between 2016 and 2018, while cultivating and distributing strains of CBD for free.
Even after three of Nevada County’s five current supervisors — Heidi Hall, Ed Scofield and Sue Hoeck — visited Laughter’s property off Idaho-Maryland Road, the attorney’s property was automatically disqualified from a cannabis business license because the land falls within Zoning Res-Ag.
“It’s not because (the industry) is dangerous or filled with criminal activity,” Laughter said. “That’s because some neighborhoods with the Res Ag zoning have been strongly opposed. Politics is a matter of finding compromises.
Laughter’s property is also not large enough to qualify for cash cropping, he said, so even if Laughter lived elsewhere on such a narrow plot – “my property doesn’t quite measure 200 feet wide” – it does not meet the 2 acre minimum.
According to Nevada County Chief Financial Officer Martin Polt, the county spent “a lot of money” over three to five years to advance licensed cultivation efforts in Nevada County.
Polt said the county has invested “significant dollars” to develop the licensing program, including staff dedicated to planning and building aspects of the legalization process, as well as cannabis compliance units.
Polt said he couldn’t determine the total amount invested in developing the program, citing complexities between overlapping and separate responsibilities for cannabis code enforcement and the county’s planning department.
Beyond that, Polt said, Grass Valley and Nevada City are responsible for cultivation and distribution permits and procedures 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 provides some infrastructural support, but each jurisdiction must develop its own regulations and ordinances.
Barry Anderson, a management analyst with the Nevada County Executive Office, said $1.9 million is the cost to the county so 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 set up the Cannabis Compliance Division,” Anderson said. “This does not include the costs associated with measuring tax revenue.”
“I’m not saying we’re going to recoup the costs,” Polt said. “We haven’t caught up by any means…. It’s more than a drop in a bucket.“
Polt said it’s difficult to identify concrete costs to public agencies engaged in local legalization because the cannabis industry engages different county resource areas that provide support and monitor the industry.
Josh Merriman of County Cannabis Compliance said the county began issuing permits and collecting fees in 2019 when the program began.
Merriman said the fees attached to permits exclusively pay for staff time.
“There are no official fees outside of time,” Merriman said. “Staff time is billed by the hour.”
Nevada County has one of the lowest — if not the lowest — fees for obtaining an administrative development permit for up to 10,000 square feet of cannabis, Merriman said. Smaller sites applying for commercial cannabis licenses have a “faster turnaround time.”
After investigating similar processes in Yolo County, Merriman said he discovered the agency was charging $40,000 for the permit with an annual fee of $9,000.
“Our annual dues are $900,” Merriman said.
Laughter said a Nevada County farmer seeking legitimacy would pay less than growers 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. “It’s a whole different level of difficulty.”
Nevada County supervisors conducted a countywide environmental impact report in 2018, Merriman said, which gave way to an order offering umbrella state license eligibility for permit recipients. .
“Other jurisdictions require a conditional use permit,” Merriman said, adding that site-specific analysis required with the permit application is typically time-consuming and expensive. “We did a county-wide EIR, so we have a streamlined cookie-cutter order.”
Laughter noted that a farmer in Mendocino trying to legalize his business would pay thousands of dollars more than a grower in Santa Barbara, one of the few other counties with a similar inclusive ordinance.
“Look with the Idaho-Maryland mine,” Laughter said, referring to the lengthy process it took for Rise Grass Valley to reopen gold mining operations on two properties zoned for light industry. “Imagine if every farm had to do this.”
A Nevada County grand jury report released in May 2021 estimated that there were between 3,500 and 4,000 “illegal crops” in operation.
According to Merriman, administrators have received 239 license applications to date. One hundred and fifty-five have been approved so far, Merriman said, and the rest remain in various stages of review.
“If you don’t have a permit and license, you can’t operate,” Laughter said. “That’s why Nevada County is seeing an explosion here – you can legally operate in the cannabis market.”
Rebecca O’Neil is a staff writer for The Union. She can be reached at [email protected]