Meeting Time: March 14, 2023 at 9:00am PDT

Agenda Item

4g) Discussion and Possible Action Including Introduction and Waive First Reading of an Ordinance Amending Sections 6.32.050 and 6.32.100 of the Mendocino County Code to Provide, for Cannabis Cultivation and Nursery Operations, a Reduction in the Cannabis Business Tax for Tax Years 2023 and 2024 and to Establish a Penalty and Interest Amnesty Program and a Prior Year Tax Payment Plan (Sponsor: Supervisor Mulheren)

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    John Sakowicz 12 months ago

    To the Board:

    This is a no-brainer. Vote to approve. High taxes for farmers have reached the level of “an extinction event”. As wholesale prices plummet to a low of $300 per pound, many of us are us moving out of Mendocino County. I am starting a farm in New Jersey. Those who remain in the county are going bankrupt or they're growing for the black market.

    If the business argument isn't enough to convince you to lower permit taxes, think of lower taxes as a "social equity measure". Most cannabis farmers are subsistence farmers just trying to support their families.

    John Sakowicz
    Ukiah

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    Stan Anderson 12 months ago

    I oppose the Marijuana Growers tax amnesty proposal. I’m sure that many growers have invested years of hard work and copious amounts of money to bring their product to market. For any number of reasons, they have failed to make a profit for their efforts; weather, soil conditions, government policies, taxes, and the big one, competition from large multinational grower combines that undercut our local growers’ prices.

    But are growers really much different than other mom-and-pop business owners who have been put out of business by weather, wildfires, COVID lockdowns, taxes, changing technology and competition from Amazon, Walmart, COSTCO and other big-box stores and on-line marketers? How many local stores and shops and restaurants have been closed since 2019 alone? It’s called free enterprise; businesses die and others are born. And not all of it is fair but that is reality. And the owners of those small businesses didn’t get any tax amnesty or payment plans from the county, state or federal governments.

    It is a strange dichotomy that the BOS wants to give tax amnesty and forbearance to growers on the one hand and on the other, the Sheriff’s Marijuana Eradication Team is making sweeps to clear illegal grows by those growers avoiding the permit process and tax structure.

    It is really unfortunate that the growers, despite all their efforts, are in the situation they find themselves but is it really much different that all those who chose to invest their money in cryptocurrency? Life is a crapshoot.

    Each year, thousands of Mendocino County taxpayers pay their property tax and other addons for libraries, Measure B, Fire Protection etc. No doubt many struggle to make those payments But let them fall behind and there is no tax amnesty or forbearance for them – only added fines and interest. Until the BOS is prepared to make similar concessions to regular taxpayers, in all fairness, they should vote NO on the marijuana growers tax amnesty proposal.

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    DAVID GUGGENHEIM 12 months ago

    To: Each Supervisor on the Mendocino Board of Supervisors
    From: David M. Guggenheim and Holly W. Guggenheim, davidmguggenheim@gmail.com
    We are 39 year residents of Mendocino and our three children graduated from Mendocino High School.
    March 14, 2023
    Regarding any and all forms of Mendocino County governmental financial support of the cannabis industry individuals or companies,
    David M. Guggenheim and Holly W. Guggenheim are STRONGLY OPPOSED TO ANY AND ALL FORMS OF MENDOCINO COUNTY GOVERNMENTAL FINANCIAL SUPPORT OF THE CANNABIS INDUSTRY including all current pending tax amnesty and direct financial grant proposals for the following reasons.
    Cannabis is harmful to people’s mental health: Marijuana use has been linked to depression; social anxiety; and thoughts of suicide, suicide attempts, and suicide. THC alters the way you process information so your judgement is impaired. People who use marijuana are more likely to develop temporary psychosis (not knowing what is real, hallucinations, and paranoia) and long-lasting mental disorders, including schizophrenia (a type of mental illness where people might see or hear things that are not really there). The association between marijuana and schizophrenia is stronger in people who start using marijuana at an earlier age and use marijuana more frequently.
    Cannabis is harmful to people’s physical health: evidence suggests that a person’s risk of heart attack during the first hour after smoking marijuana is nearly five times his or her usual risk. Marijuana smoke irritates the lungs, and people who smoke marijuana frequently can have the same breathing problems as those who smoke tobacco. These problems include more frequent lung illness, and a higher risk of lung infections and cancer.
    Any and all cannabis support money should instead be spent on socially and environmentally beneficial Mendocino County institutions and projects like: Mendocino schools and Mendocino hospitals and Mendocino food and shelter projects and socially beneficial new industries in Mendocino County.
    The Mendocino cannabis industry is a failed business model because large producers including CURELEAF (2.5 billion market cap.), GREEN THUMB (1.9 billion) , TILRAY (1.5 billion) TRULIEVE (1.3 billion), CANOPY (1 billion) VERANO (1 billion) and many other large corporations have too much supply capacity at low prices and Mendocino individuals can not compete with the scale of corporate production and distribution.
    What would Jesus do?
    What would the sheriffs do? What would the school principals do? What would the doctors do? What would the clergy do? All people of good moral conscious should STRONGLY BE OPPOSED TO ANY AND ALL FORMS OF MENDOCINO COUNTY GOVERNMENTAL FINANCIAL SUPPORT OF THE CANNABIS INDUSTRY including all current pending tax amnesty and direct financial grant proposals.
    I hope this cannabis grant proposal is the spark that motivates good apathetic citizens like myself to get involved in local government. Please send me a list of all individuals and companies that receive any form of county financial support for the cannabis business.
    Very Sincerely, David M. Guggenheim and Holly W. Guggenheim

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    erika ay 12 months ago

    As an MCA member who is no longer in business as a licensed cannabis cultivator, I still support my comrades and community. I support MCA's memo and proposal 4g for the much needed tax relief. All the community will benefit. Thank you

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    Stuart Marcus 12 months ago

    Yes, I support this proposal 4g.
    The County licensing application process has been dysfunctional and damaging to local permit applicants who deserve some relief and support.
    The current situation and market conditions do not support a minimum tax without supporting gross sales.
    Thank you.

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    Laura Clein 12 months ago

    Dear Supervisors, We are in support of tax relief... Thank you. Laura & Marty Clein, Martyjuana™

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    Kevin Bush 12 months ago

    Dear Supervisors,

    I support the memo submitted by MCA.
    Cannabis businesses desperately need help right now.

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    Kyle Greenhalgh 12 months ago

    I support this 100 percent! This is going to help everyone in our county. These tax burdens hurt all businesses in our county if we don’t have the money to spend in our local shops and stores. This is a much needed fix. Let’s do Mendocino a huge favor and help make it thrive again.

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    Patrick Sellers 12 months ago

    Honorable Supervisors,
    Please pass this much-needed tax reform item today. As a consultant working solely with cannabis farmers in Mendocino county, I have had to use similar strategies to revise my rates and payment terms to make them compatible with the reality on the ground.

    By doing so, I've been able to collect nearly 65% of the debt that had accrued to me, all while continuing to process people's permits, CEQA paperwork, grant applications, etc.

    A triage approach is needed, and this tax item is a lifeline to folks on the brink of collapse. People need major tax reform and permits/applications need to be reprioritized immediately. I wrote you all individually about the coming 'death by deprioritization' and the looming CEQA progress benchmark requirements that change on July 1.

    Thank you Supervisor Mulheren for pulling this proposal together with urgency, and thank you Supervisor Haschak for supporting it when it was brought forth at the General Government Committee 2 weeks ago.

    Respectfully,
    Patrick Sellers

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    Jed Davis 12 months ago

    I appreciate and support Supervisor Mulheren's proposal to give any sort of assistance to operators who have been bludgeoned by the current cannabis marketplace, over-regulation, changing expectations by the county, and flagrant inefficiencies of the MCD so that they can make it through this extremely precarious time for our county's cannabis industry.

    I fully endorse Hannah Nelson's memo and encourage the board to discard the short sited position of Supervisor Williams who has completely disregarded any responsibility that the County's inefficiencies have contributed to the situation at hand which has caused tons of extra work (often costing thousands of dollars for the applicants to endure) as a MAJOR part of the problem for cultivators. If I were to bill the county for the amount of extra money I have spent on building permit extension fees, extra consulting services, labor costs, compensation for the dozens of my hours that I have spent resubmitting application materials multiple times which the MCD should already have on file from my initial permit application five years ago, then the county would actually be owing me money, to the tune of $20,000+.

    I also support MCA's letter and the suggestions made in that letter. This proposal by Supervisor Mulheren is imperative if there is any chance to save the county's cannabis industry on the back of the worst year in cannabis market history which follows five years of regulatory and permitting uncertainty both at the County and State levels, throwing this lifeline to the cultivators of Mendocino County is imperative.

    Thank you.

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    Mackenzie ODonnell 12 months ago

    I am one of many tax payers in this county in support of cannabis tax reform which is being discussed this morning at the BoS meeting.

    These reforms would impact me personally in that I desperately need assistance in order to proceed at all with my own operations in order to continue living and being an active member in the community.

    I am not alone; these reforms are critical for the viability and future of so many people in the county and without aggressively changing the way we approach this ordinance, there are fewer and fewer reasons to continue staying in this county at all. We simply won't have an economy if we can't operate, and we can't operate without assistance the way things originally have been established for local operators.

    I support this recommendation and DESPERATELY need our supervisors to do something here as well.

    additional thanks to Maureen Mulheren for her initial support, but the entire board needs to get it together and act as a united front even if not for personal reasons. Our local community would have more options to function and thrive if we could enable these amendments. PLEASE AND THANK YOU.

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    Monique Ramirez 12 months ago

    Dear Supervisors,

    I support the memo submitted by MCA.
    Cannabis businesses desperately need help right now. Some were unfortunately unable to pay their taxes in prior years for a myriad of reasons but many of which probably stem from facing wildfire disasters and crop failure and losses.

    Providing a pathway with the thoughtful recommendations being brought forward will go a long way in helping businesses get back on their feet and produce long term tax revenues to the county by staying in business and also not being deprioritized for permitting review.

    At the national level, we are seeing a frightening potential banking crisis with very prominent banks folding over the last several days. Our federal government has stepped in to help these businesses in crisis because their direct impact to our national economy is of that much concern.

    The same parallel could be drawn with our own local situation. We can’t afford to lose any more businesses in Mendocino County and everything that can be done at the local government level to help is greatly appreciated by the community.

    Please support the amnesty program and the tax payment plan being recommended. It will go a long way towards helping struggling businesses feel like maybe there is some hope they won’t fail.

    With appreciation and gratitude,
    Monique Ramirez

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    russell perrin 12 months ago

    Dear Supervisors,
    I would love to pay taxes to a county that is supportive and will push through applications, pass along CEQA docs . However, this is not what's happening nor our reality. All taxes should be suspended especially if the cannabis Department has the grant money to burn. It is always helpful to reduce or temporarily suspend taxes for new businesses that are in dire straits. thanks for service for the residents of Mendocino County. Thanks for your service.

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    Michael Adams 12 months ago

    Dear Supervisors:

    I am Michael Adams. I hold a Mendocino Permit and a California Provisional License to cultivate outdoors. I am a member of MCA and support the memo they submitted regarding this item. In addition, I want to state that as Supervisors it is your responsibility to the people of this county to help our Cannabis businesses survive and thrive.

    I support the tax reform items brought by Supervisor Mulheren and the recommendations of both her and Supervisor Haschak of the General Government Committee:
    1.) An Amnesty Program for tax penalties and interest still owed,
    2.) A payment plan for those who have been Deprioritized due to late tax payments,
    3.) And a 50% reduction in the Minimum Cannabis Tax for tax years 2023 and 2024

    The goal is to bring our farmers into compliance and support them in this time of transition. If they fail there will be no taxes to collect.

    Thank you for your consideration.

    Michael Adams, Nurturing Seed Farm, Willits

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    Jim Roberts 12 months ago

    Honorable Supervisors,

    I want to thank Supervisor Mulheren for tackling this problem and looking for a solution moving forward. There are many reasons why folks have fallen behind or have been unable to even keep up with the minimum tax payment that is required. Most farmers who are in the bulk wholesale market have been unable in the past two years to sell any product. They were completely at the mercy of distributors who were not paying and then ended up closing their doors. With the dip in the market, a great deal of the flower at our farm, which had been processed, went into our compost pile as large vertically integrated players created an oligopoly and drove down market prices with over production. It was a perfect storm for the small farmer, but the outcome is also taking out a lot of the larger cannabis companies south of us who did not scale growth in a thoughtful and measured way.

    Lastly we need to have a repayment plan for those that have fallen behind. Given the unbearable hardship with a market that has bottomed out, extra fees and penalties should be waved. 30% of cannabis businesses in California have collapsed in this current turmoil (and those are well resourced entities) . We need to recognized the reality of the industry statewide and retain as many farms that have the will and fight to remain in the game. Once that happens, county applicants need to be reprioritized in the MCD review process. Our application was deprioritized in the fall with a notification we received from MCD. We were current on our taxes, but the department made a mistake as they did with so many other applicants in the system. The burden to prove this was put back on us right when we were working long days during the harvest. For those that have fallen behind they should have the opportunity and dignity to make good on their debts, with out added penalties and fees, while bringing their farm into full compliancy.

    With Respect,

    Jim Roberts
    The Bohemian Chemist
    The Madrones & The Brambles
    Sugar Hill Farm

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    Joseph Seidell 12 months ago

    Dear board of supervisors :
    Thank you for all your efforts and reading these comments.
    I strongly support these measures. I have been in the licensing system since 2017 and I’ve had three years of failed crops due to disease soil. I cannot pay my taxes I’ve had nothing to sell. There’s no way to recoup my costs and I want to keep my licensing to keep trying and upgrade my farm with the grants help sterilize and restructure, my soil and start growing successful crops, again .,, but I can’t access the grants until my taxes are paid but I can’t even though I’m at equity applicant until the penalties are paid, and I absolutely cannot afford them and until my Permit gets on the prioritized list . I can’t do that until my taxes get figured out please support this measure I’ve given everything including a second mortgage on my house. I’m in the extreme amount of debt and I’ve spent my whole time trying to stay in compliance this is going to be generational debt if I can’t figure out how to make a profit and stay in license status, please do what’s best for all of us who come out of the closet and put everything on the line to become good text pain citizens. Unfortunately, the market was saturated and we haven’t been able to turn in the money from all the hard work please pass tax relief and penalty and payment plan amendment. Thank you.
    Joseph seidell

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    Mary Aigner 12 months ago

    Supervisors,

    I fully support the cannabis tax reform proposal to reduce the cultivation tax & provide penalty & interest amnesty for those in arrears, while providing them with a payment program so they can get current. I strongly urge you to do the same.

    A reduction in the minimum cultivation tax is long overdue, as the cannabis market has changed dramatically since the ordinance was written. To meet the $5000 tax minimum, a farmer with a 10,000 square foot license would need to produce 500 pounds and sell them for $400 per pound. Few if any local farms have been able to do this since the market crashed post -Prop 64.

    I'm not aware of other local industries that are required to pay a minimum tax regardless of actual income. Making the minimum cultivation tax more affordable for farmers during this market downturn will help insure that Mendocino County will continue to have small farmers and a cannabis industry moving forward.

    Giving farmers who are in arrears on their cultivation taxes an amnesty & payment program is highly beneficial for all concerned. Farmers who owe taxes will have a path forward to retain their licenses & livelihoods, while the county will benefit from those much needed tax dollars that would likely never otherwise be received.

    Kudos to Supervisor Mulheren for bringing this forward and to Supervisor Haschak for his support.
    I strongly urge the board to pass this and move it forward with all due haste.

    Sincerely,
    Mary Aigner

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    Alexander Cummings 12 months ago

    Dear Supervisors,
    I'm writing to support this item and recommendations from the MCA memo and letter by Hannah Nelson. Having flexibility in our tax policy will hopefully allow Mendocino County cannabis businesses the chance to compete and succeed going forward.

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    Michelle Penaloza 12 months ago

    Dear Supervisors:

    I am writing to support the MCA memo regarding this agenda item; I fully support the implementation of the proposed Cannabis Business Tax Penalty and Interest Amnesty Program (Amnesty Program) for licensees who have fallen into arrears on payments.

    I support MCA's recommendation that any operator currently identified as ‘Deprioritized’ immediately be factored into MCD’s plans for application review. Due to rapidly approaching state deadlines, it is imperative that MCD be prepared to process applications of those that may participate in the Payment Plan. The implementation of this program should also make clear that participating applicants have full access to any and all active grant programs, including LEEP and LJAGP eligibility and funding. I urge you to adopt all three tax reform components as presented.

    Thank you for your time.
    All the best,
    Michelle Peñaloza

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    Matt Maguire 12 months ago

    Supervisors

    I fully support Agenda Item 4G cannabis tax reform
    This tax relief is a step in the right direction to fix a broken cultivation tax program. The transient occupancy tax does not have a minimum amount due based on the size of the lodging, and cannabis should not either. The minimum tax due is anti business and encourages farmers to fallow.
    Many other counties and municipalities in California have suspended their cultivation tax. They have realized taxing the cannabis industry is not sustainable.
    Recently humboldt county passed a resolution suspending 100% of the cultivation tax for 2023 and 2024
    The resolution states
    For cultivation year 2022, collected in tax year 2023, the cannabis excise tax rate shall be temporarily suspended in full, resulting in a 100% reduction of the currently authorized rates and no Measure S cannabis excise taxes will be billed or due for this tax year.
    For cultivation year 2023, collected in tax year 2024, the cannabis excise tax rate shall be temporarily suspended in full, resulting in a 100% reduction of the currently authorized rates and no Measure S cannabis excise taxes will be billed or due for this tax year.
    The second installments of the cultivation year 2020, originally due in tax year 2021, remain due but are not subject to penalties and interest during tax year 2023 and tax year 2024.
    The first and second installments of the cultivation year 2021 originally due in tax year 2022 and already reduced by 85% remain due but are not subject to penalties and interest during tax year 2023 and tax year 2024.
    All other billed and assessed Measure S taxes, penalties, and interest due for prior cultivation years remain due and are subject to all applicable penalties and interest charges.
    This resolution also authorized and directed the Treasurer-Tax Collector to take actions consistent with the resolution. As such, the Treasurer-Tax Collector’s office will accept payments in any amount toward the outstanding balance of Measure S cannabis excise taxes through December 31, 2024.

    Please pass this ordinance today and direct staff to come back with a proposal to reduce taxes by 100%

    Thanks

    Matt Maguire