22 MONTEREY COUNTY WEEKLY july 13-19, 2023 www.montereycountyweekly.com the legal industry in Monterey County, if not California at large, is doomed to failure. Mike Hackett was one of the early movers in local cannabis cultivation. In the wake of the local flower-growing sector’s demise, Hackett snapped up abandoned greenhouse properties with an eye to renting them out for agricultural logistics like equipment storage. When Monterey County began permitting cannabis growers, Hackett and his daughter Michelle saw an opportunity. Their company, Riverview Farms, now operates nearly 500,000 square feet of canopied greenhouses across two 10-acre parcels along Potter Road just off Highway 101. A recent visit finds a full-scale agricultural operation: Not just grow-houses but climate-controlled nurseries and facilities dedicated to the various steps of harvesting the plants. “This is agriculture,” Mike Hackett says, noting that even visiting county inspectors are sometimes surprised by the sophistication and legitimacy of what they find. Whereas some Salinas Valley growers pride themselves on being “seed to salad,” Hackett adds, “we’re seed to smoke.” Yet Riverview is neighbored by multiple empty and inactive parcels where cultivators have succumbed to the same pressures that have challenged the Hacketts’ business. Above all has been collapsing marijuana prices: Michelle Hackett, who runs Riverview’s day-to-day operations as president, says greenhouse growers— who, compared to indoor and outdoor growers, represent the overwhelming majority of the county’s cannabis cultivators—now expect to receive anywhere from $500 to $650 per pound of product “on a good day,” compared to north of $1,500 several years ago. Meanwhile, Riverview’s production costs come in at $400 to $500 per pound, which doesn’t account for the various taxes and licensing fees they also have to pay, according to Michelle Hackett. “The market has basically stayed, for two years, at an at-cost rate,” she says. “What it’s cost us to produce is what it’s cost to sell—it’s been almost a push.” In turn, Riverview operated at a loss last year, she says, while having to dramatically downsize its staff (to around 60 people, from a peak of nearly 150) and cut expenses across its operations. Compounding those market dynamics have been taxes and licensing fees that are considered across the industry, virtually unanimously, as untenable. As well as county cultivation, nursery and manufacturing taxes, as well as land use permits and cannabis business licenses—not to mention a persquare-foot cultivation tax imposed on county growers by the Monterey County Regional Fire District—there’s a separate array of taxes and licensing requirements imposed by the state. Operators are particularly critical about layers of regulatory codes concerning their growing facilities, which they claim are not as strictly imposed on other agricultural sectors. These include fire sprinklers and water tanks, flushable toilets and accompanying septic systems, and other building regulations that can cost hundreds of thousands of dollars to comply with. (Mike Hackett notes that as a result of the mandated building improvements, Riverview’s property taxes have also climbed significantly—from $10,000 per year to $90,000, he claims—due to the revised assessed value of the company’s property.) Growers complain of a stringent culture of enforcement around these requirements in Monterey County that results in constant scrutiny and little wiggle room around violations. They often point to the county department staffers tasked with administering those rules, which are often mandated at the state level, as the culprits. “Monterey County is 100 times worse than Santa Cruz County,” according to CannaCruz’s Palmer, who runs cannabis businesses in both jurisdictions. “In Santa Cruz, we get inspected maybe once a year—they come through, make sure everything is fine, and leave. In Monterey, we were getting inspected monthly at one point. There’s no such thing as another agricultural crop that gets monthly inspections from Monterey County. They’re regulating cannabis as if it’s plutonium.” As a former Monterey County deputy agricultural commissioner who worked in county government for years, Bob Roach is familiar with how the local bureaucracy operates. Roach, who most recently served as executive director of the Monterey County Cannabis Industry Association, blames some of the code enforcement issues on the way legal cannabis was codified by the state via Prop. 64. The law established layers of oversight administered by various state agencies, which counties are mandated to enforce. But Roach also reserves criticism for how the county has gone about interpreting and enforcing many of those rules. “The county never goes in a [non-cannabis] greenhouse and checks if they did all of their permits,” he notes. “For cannabis, they go out there and write up everything they can…[Cannabis operators] have been burdened with all of these costs and made to comply with the letter of the law with maximum enforcement pressure, which other [agricultural] businesses don’t face.” Aaron Johnson, an attorney who sat on the Monterey County Cannabis Industry Association board, attributes that regulatory approach to lawmakers and bureaucrats “who didn’t want [cannabis] here” and “were reluctant to treat it like any other agricultural commodity.” “Some of the concerns about having this type of product here forced them to focus on extreme oversight,” Johnson says. “Part of that was warranted, but if we’ve made the decision to allow for the product to be grown and distributed, you have to make it economically feasible for these entities to do that work.” As a result of declining cannabis tax revenues, the Monterey County Board of Supervisors cut the budget for the county’s Cannabis Program by 30 percent in the 2023-24 fiscal year budget, to under $3.4 million. That budget funds positions and functions at county agencies, like the Department of Housing and Community Development, that are charged with overseeing the industry. The move will result in the streamlining of the county’s regulatory oversight, according to county officials. Monterey County Cannabis Program Manager Joann Iwamoto says she understands the complaints lodged by operators—several of whom express Cannabis greenhouses in Monterey County must pay a per-square-foot cultivation tax to the county. While the Board of Supervisors has repeatedly slashed that tax rate in recent years, growers insist it’s still too high given the industry’s current economics.
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