After multiple quarters of increasing cannabis tax revenues, Santa Barbara County reported an “unanticipated” drop in the fourth quarter of the 2020-21 fiscal year.
The county collected a total of $3.8 million in cannabis gross tax receipts from 58 operators during the fourth quarter, which is a 34% decrease from the third quarter total of $5.1 million and a 45% decrease from the revenues collected in the same quarter of the previous year, according to the staff report.
“It appears that statewide, oversupply of wholesale cannabis product is beginning to develop, much as it did in other states that legalized adult-use cannabis prior to California. A supply glut, of course, drives down prices, which in turn affects sales receipts,” said Steven Yee, a fiscal analyst with the County Executive Office. “However, on a positive note, we did end the fiscal year having collected a total of $15.7 million, which represents a year-over-year increase of about 29%.”
Out of 112 operators, 58 reported gross receipts, 43 reported zero gross receipts and 11 did not file tax reports — which is the lowest number ever of noncompliant operators who didn’t file reports, according to Yee.
“We are starting to see an increase in compliance in that regard,” he added.
Yee said the county is joining the California Cannabis Authority to get more information about specific cannabis businesses.
The CCA is a joint powers authority created by a contract among counties with cannabis regulatory and/or taxing authority that develops and manages a statewide data platform that will collect and analyze information to help local governments ensure cannabis regulatory compliance, according to a staff report.
The Santa Barbara County Board of Supervisors later in the meeting on Tuesday voted 4-1, with Fifth District Supervisor Steve Lavagnino in opposition, to join the CCA with a $500,000 annual membership fee. Lavagnino said he had a problem with joining the CCA because it would share the county’s cannabis information with competitors.
“I know we like to talk about we’re all counties and we’re all working together, but the reality is, in the world of cannabis, Monterey is our competitor,” he said. “I’m not sure I want to share everything that’s going on in Santa Barbara right now.”
Other board members said the county will have to evaluate whether the membership is worth the money in the future, but for the time being, the membership will provide certainty that operators will be doing what they are supposed to be doing.
For the 2021-22 budget, the county allocated about $8 million of the expected $19 million in cannabis tax revenues toward administration and enforcement costs.
Enforcement
During the course of the fourth quarter, the sheriff’s cannabis compliance team executed nine search warrants and made 10 arrests related to illegal indoor and outdoor cultivation, according to the staff report. The team recovered cannabis plants, dried flower, consumable products and other illicit drugs such as several ounces of fentanyl, Xanax, cocaine and methamphetamine.
More than 6,970 plants were eradicated, and 1,615 pounds of cannabis product totaling an estimated street value of $6.1 million were confiscated, the report stated .
A detective from the sheriff’s compliance and enforcement team was recently re-assigned to the sheriff’s licensing team to focus solely on the licensing process, which has “increased efficacy and eliminated redundancy and delays in the licensing process,” according to the staff report.
The Agricultural Commissioner’s Office had two ongoing investigations during the fourth quarter, one in the North County and one in the South County, regarding worker health and safety and pesticide use, according to the report.
Planning and Development opened an additional seven enforcement cases — five in the South County and two in the North County — and no enforcement complaints were closed.
The Planning and Development Department responded to 518 cannabis complaints, 495 of which were odor complaints in the Carpinteria area.
“The majority of odor complaints in the Carpinteria area continue to originate from unpermitted, nonconforming grows,” the staff report stated.
County Gives Update on Permit and Licensing Applications, Dispensaries
Most of the county’s cannabis operations are cultivation so far, and applicants need to receive a land use permit and a business license to be fully approved.
There are also hundreds of acres of “legally nonconforming” farms that are operating while they go through the permit review process, but do not have county permits or licenses and do not have to abide by county regulations, such as odor control.
In the fourth quarter of 2020-21, which ended June 30, the county received five new land use planning project applications, approved seven projects for cannabis land use entitlements pending issuance and issued eight project permits, according to Yee.
Since the inception of the county’s cannabis program, 181 applicants have submitted for land use entitlements, 34 projects received permits and 22 permits are pending issuance, according to the staff report. Yee said that the Planning and Development Department has increased the pace at which staff members are reviewing applications and issuing permits. This year’s budget funded additional employees for that purpose.
There are applications for more acreage than is allowed under the county cultivation caps of 1,575 acres for inland areas and 186 acres for the Carpinteria area. To date, there are 502 permitted acres in the inland areas, with 2,619 acres in the application pipeline, and 46 permitted acres in the Carpinteria area with 176 acres among applications, according to Yee.
“The message that we’re trying to convey here is that the cultivation caps are quickly filling up; there are excess demands in terms of the acreage that is being applied for,” he said.
The county received 123 business license applications to date and has issued 24 licenses to 14 operators that have been deemed compliant, with two issued in the fourth quarter, Yee said, adding that there are 99 license applications that are being processed, including 58 cultivator licenses, 29 nursery licenses, 10 distributor licenses and two retail non-storefront (delivery) licenses.
Yee said that the majority of pending license applications are because of operators not yet having an issued permit, which is a requirement to obtain a business license.
The county completed its ranking process for cannabis dispensary applicants who want to open a storefront retail location in unincorporated areas, according to Brittany Heaton, who works in the county’s cannabis program.
The county capped the number of dispensaries at six and chose the highest-ranked applicants in the Toro Canyon/Summerland area, the eastern Goleta Valley, Santa Ynez, Los Alamos and Orcutt.
The top applicants were all notified and invited to start the land use entitlement process, and all applicants — with the exception of Orcutt — have submitted their applications to Planning and Development, Heaton said. Orcutt’s top-ranked applicant was notified later than the other applicants, because of a legal challenge to the ranking process, and has until mid-November to submit the application.
The dispensary operations allowed to apply for permits include:
» The Roots Carpinteria at 3823 Santa Claus Lane
» Island Drift LLC doing business as The Annex at 4235 State St. in the eastern Goleta Valley
» The Farmacy IV at 6555 Pardall Road in Isla Vista
» The Farmacy SY doing business as SBDank at 3576 Madera Drive in Santa Ynez
» Haven X LLC at 520 Bell St. in Los Alamos
» Cookies at 1604 E. Clark Ave., Building B, Suite 1 in Orcutt
— Noozhawk staff writer Jade Martinez-Pogue can be reached at jmartinez-pogue@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.
