Supes Drive Down Proposed Cannabis Tax Rates

Humboldt County’s Board of Supervisors has reevaluated a proposed rate structure for a marijuana excise tax ballot measure, significantly cutting previously agreed-upon tax rates.

Tax rates related to a proposed commercial marijuana excise tax measure for the November election were changed by supervisors at their June 28 meeting.

A week before, supervisors considered a staff-recommended tiered system based on grow sizes. That system had starting rates of $1 per square foot for a 2,500-square-foot outdoor grow, $1.50 per square foot for a mixed-light grow of up to 2,500 square feet and $2 per square foot for an indoor grow up to 1,000 square feet.

The staff-recommended rate schedule scaled up with grow size, topping out at $6 per square foot for a 10,000-square-foot indoor grow. Supervisors agreed to cut those rates by 25 percent.

But at this week’s meeting, Supervisors Ryan Sundberg and Rex Bohn said they’ve heard from people involved in marijuana production who are concerned about being over-taxed. Sundberg proposed changing the basis of the tax rate, linking it to amounts produced rather than grow areas.

That sparked debate among supervisors. Supervisor Estelle Fennell warned against making significant changes as the deadline for approving a measure for the November ballot closes in.

“At this point, we’ve gotten so much feedback that I think if we change the process now, we’ll get another bunch of feedback next week and we won’t even make it to the November ballot,” she said. “We have to make a decision and if you’re uncomfortable with the amount, let’s discuss that but let’s not discuss changing in midstream again.”

During a public comment session, representatives of growers’ groups said they support being taxed but want a system that more precisely reflects production output.

But the directors of the First Five and Changing Tides family and children’s services groups noted that paying for children’s services is one of the proposed tax measure’s goals and there needs be enough revenue generation to cover it.

County Treasurer-Tax Collector John Bartholomew advised supervisors not to “backpedal” on the previously agreed-upon system.

After further debate, supervisors agreed to maintain grow sizes as a basis of taxation. Sundberg advanced a proposal that gained majority support — having a fixed rate structure charging $1 per square foot for outdoor grows, $2 per square foot for mixed-light grows and $3 per square foot for indoor grows.

Board Chair Mark Lovelace disagreed with that, saying that other municipalities are pursuing marijuana tax rates much higher than Humboldt is proposing.

“There are other ones that are proposing $25 a square foot, $35 a square foot,” he continued. “And those are places that are trying to attract the industry.”

Lovelace said the other municipalities are looking at higher tax rates as “something that is doable within the profit margins for this industry,” adding that he couldn’t support reducing the rates “to about half of what was originally proposed.”

But Sundberg said Humboldt isn’t comparable to other areas because its marijuana industry is more entrenched and includes far more participants.

“These other areas have so much less, they’re dealing with very, very limited amounts and their higher tax amounts are going to produce a lot less income than we have around here,” he continued. “We have around 10 times as much — if we can get half of what’s out there, we’re going to have way more money in the tax rolls than they could even come close to.”

Supervisors voted in favor of Sundberg’s proposal, with Lovelace dissenting.

A draft ordinance outlining the tax measure’s content and approving the tax proposal for the November ballot will be presented to supervisors on July 19.