24 MONTEREY COUNTY WEEKLY july 13-19, 2023 www.montereycountyweekly.com a favorable opinion of Iwamoto and the work her staff has done to adapt the county’s policies and ease the burden on the industry. Still, she adds that county regulators must abide by the rules established at both the local and state levels. “It is a very costly investment when you say you want to be a commercial cannabis operator; there are so many requirements at the state and local level,” Iwamoto says. “You have to remember, we’re not talking about lettuce or strawberries…It’s a highly regulated, highly taxed industry. And if the question is ‘Why can’t you treat me like a strawberry grower,’ it’s because there are different requirements.” In the meantime, the industry has been left to limp along. Though Iwamoto says she still meets monthly with groups of local operators, some have complained about increasingly irregular meetings with the Board of Supervisors’ cannabis committee, while bemoaning how the board’s policy decisions have contributed to the current situation. The distress has reached the point where the Monterey County Cannabis Industry Association, led by Roach, is now effectively defunct due to members being unable to pay their dues. As one of two supervisors on the board’s cannabis committee, Mary Adams has positioned herself as a key supporter of the industry within the halls of county government. Adams points to decisions made at the onset of the county’s Cannabis Program in 2016 that continue to have repurcussions— such as an initial ban on outdoor growing that “wiped out” established medicinal growers and forced most of the industry into “decrepit greenhouses” in need of upgrades. “For a while, it felt like the powers that be did not want this industry to succeed and made decisions to do everything to combat it,” Adams says. “I think that’s changed in the last couple years, but it was clear that this was not a very welcoming county for cannabis growers.” Walter Huff operates roughly 180,000 square feet of cannabis greenhouses off of Alisal Road near Salinas. As the one-time mayor of Monte Sereno in Santa Clara County, he’s no stranger to the workings of local government. And whether it’s Monterey County or other jurisdictions across the state (Huff also used to have a cannabis facility in Berkeley), he believes California is driving away its legal cannabis industry. “We’re still treated in an incredibly hostile manner from the state,” Huff says. He notes that industry participants are still viewed as “dope dealers and castouts” by regulators, while federal scheduling of the drug prohibits operators from writing off business expenses in their taxes, accessing loans from major banks or even filing for bankruptcy. Despite measures like the elimination of a statewide cultivation tax last year, Huff says California’s cannabis taxes and rules threaten to drive operators out of the state to friendlier places like Arizona, where he also has cannabis investments. “We have smaller operations [in Arizona] and I make eight times the money there than I do in California,” according to Huff. “If someone wrote me a check for $20 million and a piece of property, I’d say let’s go somewhere else [outside of California]—it’s not worth it.” Kogan, formerly of Lowell Farms and Grupo Flor, describes Monterey County’s industry dynamics as a microcosm of the state’s, which he believes is costing itself in the form of now-declining cannabis sales and tax revenues. Beyond taxes and regulation, he points to an inverted supply chain that, by design, has allowed cultivators to produce far more than there is demand from a relatively limited amount of retail dispensaries. “There are more producers than there are points of sale,” says Kogan, who partly blames a framework that allowed individual cities to opt out of permitting cannabis businesses. Kogan and others note that there are now fewer than 1,000 operating dispensaries statewide—a sharp decline from the 2,000-plus stores open during the pre-Prop. 64, medical dispensary days. Johnson, the cannabis industry attorney, says those market fundamentals have transformed “what people were calling the ‘green rush’ to market failure.” But he adds that “burdensome regulations and overtaxation” destroyed margins that, in the good times, would have allowed cannabis growers to save up for the lean years. “When the agriculture industry has a good year, you don’t see Lamborghinis and Ferraris out in the fields,” Johnson says. “If you’re in the ag industry, you know to be frugal for the long term; when times are good you save, and when times are bad you dip into those savings to stay afloat…In the good years in cannabis, we really didn’t have an opportunity to save, because we were putting any money that we had back into capital improvements that were necessary for the regulations.” The economic impacts of taxes and regulations mean that, even amid tanking cannabis prices, the black market for unregulated cannabis products has been left to prosper. Industry sources say the illegal market still represents an overwhelming majority of the marijuana that’s out there for purchase—up to 80 percent, by some estimates. “The whole idea of this thing was to disenfranchise the illegal market, and you don’t do that by creating an atmosphere where illegal drugs are 150-percent cheaper than legal drugs,” according to Kogan. Roach agrees that the black market has been allowed to flourish “because of the economic disparities between producing legally and producing illicitly.” He adds that many illegal growers may have previously been legal operators, but were driven out of business by onerous business requirements. “We had medical cannabis here since 1996 and multi-generational families whose living has been growing weed,” Roach notes. “What do you expect them to do, go and flip burgers? Of course they’re going to go to the illicit side.” In turn, legal growers say the black market has eaten into the prices that they are able to command for their products. “I think the fair market rate for Monterey County [greenhouse-grown] cannabis would be anywhere between $700 to $800 [per pound], but that’s not where the market is at,” according to Michelle Hackett. “Product is obviously being offered cheaper, and the only way is if you’re not paying taxes and following the rules.” While cultivators appeal for more to be done to combat the illegal market, law enforcement authorities have made efforts to crack down on the problem. In June, the Monterey County District Attorney’s Office announced the raid Dispensaries like CannaCruz in Salinas are facing many of the same headwinds as cultivators, such as high taxes and competition from the illegal market. CannaCruz owner Grant Palmer (not pictured) says Monterey County is “100 times worse” than Santa Cruz County, where the company also operates, when it comes to regulation.
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