www.montereycountyweekly.com july 13-19, 2023 MONTEREY COUNTY WEEKLY 21 Just off Highway 101, about a 10-minute drive south of Salinas, is an expanse of farmland that has become the heart of Monterey County’s cannabis industry. Next to fields replete with the vegetable crops that have made the Salinas Valley a powerhouse of California agriculture sit gated, fencedoff parcels, most of them spanning 10 acres or more, that house sprawling, canopied greenhouses of ganja. Three decades ago, many of these greenhouses, previously full of flowers, were left empty in the wake of the North American Free Trade Agreement, which decimated the local flower-growing industry. But after California legalized recreational cannabis in 2016 and Monterey County soon followed with its own rules permitting cannabis businesses, cultivators flocked to this area to set up marijuana growing operations—breathing new life into the long-neglected facilities, creating thousands of jobs and generating tens of millions in tax revenue for the county. By 2021, cannabis was the third-most valuable agricultural product in Monterey County, with an estimated $618 million produced that year. Yet these days, a drive down the patchy, cracked roads that run alongside those fenced-off properties finds many of them once again vacant and dilapidated—their canopies tattered and yards filled with detritus, abandoned by owners who either couldn’t get growing operations off the ground or who threw in the towel after being crushed by the economic realities of their business. As is the case across California and North America at large, Monterey County’s cannabis industry now finds itself in recession, if not outright depression. According to the county, 32 local cannabis operators have gone out of business in the last 12 months—double the number across the previous two years combined. Cultivators have been squeezed by a combination of crashing marijuana prices—which they attribute to overproduction and a lack of legal retail outlets—and what they deem as overbearing taxation and regulatory requirements, at both the state and local level, that have made it impossible to pencil a break-even business, let alone a profitable one. After generating $79 million in tax revenue that went into Monterey County coffers over the previous six years, the county’s cannabis sector contributed only $3 million in the last fiscal year. Of those operators who are still around, many are now on back tax payment plans with the county. While the Board of Supervisors has moved to alleviate the tax burden on the industry—repeatedly slashing a much-criticized cultivation tax from an initial $15-per-square-foot to now under $2-per-square foot—cannabis businesses say it is still not enough, and point to a myriad of costly licensing fees and infrastructure requirements that, they argue, are not demanded of any other agricultural producers in the state. “California was the leader nationwide in regulating cannabis, and Monterey County was one of the top leaders statewide—and it lost its position because it got greedy and refused to adjust,” says Gavin Kogan, who co-founded two of the largest cannabis companies in the county, Lowell Farms and Grupo Flor. “If you tried to tax lettuce farms at $0.02 a square foot, let alone $15 a square foot, you’d have a riot on your hands.” As a result, legal cannabis operators say the local industry is now overrun with illegal growers, including cultivators who were formerly licensed but opted out of regulatory costs and have continued to sell marijuana into the black market. Licensed dispensaries have also struggled with these dynamics—challenged by competition from cheaper illegal product, as well as their own taxes and licensing requirements. While many blame the nature of Proposition 64, the 2016 ballot measure that legalized cannabis in California, for this state of affairs, they also point to a fundamental distrust toward the industry by bureaucrats, as well as opportunism by regulators who viewed the legal market as a cash cow to be taken advantage of. “You throw the word cannabis in front of anything, and everyone thinks they can charge you 10 times more than it costs,” according to Grant Palmer, who runs the Crop Circles cannabis production facility in Moss Landing and also operates the CannaCruz dispensary chain, which has a location in Salinas. “We expect regulation, we expect taxes—but we’re just being preyed upon.” Though some are optimistic that the market has bottomed out, with marijuana prices now stabilizing and even ticking upward again, there is a sentiment across the industry that more must be done to recalibrate the rules governing legal cannabis. Otherwise— absent a widespread shift at the federal level, where cannabis is still a Schedule I drug, resulting in all kinds of legal and financial restrictions—they fear Cannabis growers like Riverview Farms often entail full-scale operations that not only grow plants, but also harvest them through a multi-step process. Such farms often employ dozens, if not hundreds, of workers—though many had to cut jobs amid an ongoing industry downturn.
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