Wake Up Humboldt County
Wake Up Humboldt County – at the time legalization of cannabis loomed as a potential reality on the horizon, Humboldt County was positioned to maintain as a legal industry the prosperity that cannabis had provided the County for the preceding 30 years. Humboldt County had a well-established cannabis industry with a worldwide reputation for the quality of its product and growers. Of course, cannabis is a controlled substance under federal law and the vast majority of the residents of Humboldt County could have been criminally indicted.
Four years ago Humboldt County was poised to reap a share of the financial benefits of cannabis legalization in California. Fast forward. Humboldt County does not even have a place at the adult table. Humboldt County’s cannabis industry is struggling to survive. Many growers have abandoned the industry. A significant number of residents have left for other climates. Real property prices in the County, which briefly spiked upwards, have dropped to pre-financial meltdown levels.
Two questions spring to mind. Why did this happen? What can be done? The simple answer to the first question is that the events of the past 4-5 years produced a Boom/Bust cycle. However, the Boom/Bust collapse of Humboldt County’s cannabis industry is far direr than a simple over-production market collapse. The sky really is falling on Humboldt County’s cannabis industry. The future for the County’s cannabis industry looks bleak.
Why has Humboldt County fallen so far and so quickly? It was in the stars! The cannabis industry that developed in Humboldt County beginning in the ‘70s was an outlaw cottage industry with a frontier mentality and libertarian attitudes. A number of growers were financially successful. The darker sides of the industry were to some extent tolerated. The industry that succeeded as an outlaw industry lacked experience in the real world of business to succeed without assistance in the form of leadership and guidance.
Wake Up Humboldt County
The political and financial power base of Humboldt County has failed their community. This power base had an opportunity, and to a substantial degree still has an opportunity, to provide the guidance and leadership necessary to salvage a significant share of financial benefits of cannabis legalization for the County. However, as events of the past 18 months have demonstrated, a successful transition will not just happen. Unless the entire County pulls together most of the opportunity that legalization gave the County will be lost.
It is quite possible a majority of the population of Humboldt County will be pleased to see the County substantially withdraw from California’s cannabis industry. There will be places in small corners of California’s cannabis industry for cottage industry style cultivation and distribution for the foreseeable future. As a consequence, some Humboldt County growers will survive the shift of California’s cannabis industry away from the County. However, with legalization, the remoteness of Humboldt County becomes a handicap for cottage growers. This advantage shifts to those remote areas of California that are far closer to the major markets.
In order to understand what the County can accomplish at this late date, we must first describe how the County missed the bus. Proposition 64 passed because it was bankrolled by individuals who saw legalization as an opportunity to make money. Hundreds of millions of dollars have been invested in California’s cannabis industry as a consequence of the passage of Proposition 64. Humboldt County saw little of that money. The vast bulk of the money went to other parts of California -, particularly to Southern California. A majority of California’s cannabis market is south of the Tehachapi Mountains.
It is not just proximity to the largest half of the cannabis market that drew capital to Southern California. Southern California has land, buildings, and water. It has experienced business people. It has a labor pool that is many times greater than the total population of Humboldt County. The County had only a limited opportunity. The County was never going to be more than a source of a commodity. No prudent investor would have ever looked at Humboldt County as a cannabis investment opportunity other than one based on cannabis cultivation. Even from such a perspective, an investment elsewhere would be likely to be more attractive.
Those members of the political and financial power base of Humboldt County had an opportunity, and to a substantial degree still have an opportunity, to exploit the resources that Humboldt County has available relating to cannabis. That is not to say Humboldt County should focus solely on cultivation. The political and financial power base of Humboldt County should have launched a concerted two-pronged assault on California’s cannabis industry. This assault can still be launched, but in order to succeed, the assault must be undertaken for the benefit of Humboldt County as a whole.
Wake Up Humboldt County
Humboldt County’s entire cannabis industry is a significant player in California’s cannabis industry, but it takes a very substantial portion – perhaps all – of the County’s industry to rise to the level of significance. It is quite likely more money has been invested in California’s cannabis industry in the past two years by Canadian investors than has been invested in the entire cannabis industry of the County in the same period of time. Humboldt County lacks the financial resources and political clout to have a significant influence in Sacramento or in the state-wide cannabis industry. Humboldt County must rely solely on the resources it has.
As we mentioned above, a two-pronged assault is required. The first prong is obvious. The political and financial power base of Humboldt County must provide as much assistance as possible to preserve and protect the responsible growers of Humboldt County. All other cannabis growers should be quickly and efficiently eradicated.
The second- prong may not be obvious to some. The political and financial power base of Humboldt County must utilize every possible resource to cause Humboldt County growers to acquire significant stakes in cannabis businesses outside the County. Humboldt County must benefit financially from all of the business functions involved in the movement of cannabis from cultivator to consumer. The only way the County to do so is for its growers to have significant ownership interests in those business functions – particularly in distributors – that stand between cultivators and consumers.
California has made distributors the choke-point in the movement of cannabis from cultivator to consumer. Humboldt County has allowed itself to be placed in the position of being a large collection of small farmers who are at the mercy of the distributors who decide whose commodities get to market. It is critical for all Humboldt County growers – even those growers with the financial resources or connections to be reasonably confident their cannabis will get to market – to understand how critical it is for this dynamic to be swiftly changed.
To a substantial degree, every Humboldt County grower must set aside the rivalry of trying to be the best or most successful grower in County and focus on securing a fair share of all of the benefits of legalization. The County will secure its fair share of the financial benefits of California’s cannabis industry only if its growers have significant ownership interests in the distributors and the related businesses that effectively control the industry. California’s cannabis industry is quickly evolving into a financially efficient system that moves an agricultural commodity from cultivator to consumer. Long-term financial health for Humboldt County is critically dependent on not being frozen out of the financial benefit of the ownership of a portion of the business functions that lie between cultivators and consumers.
There are a wide variety of ways growers can acquire ownership interests in the businesses that move commodities through commercial channels. There are a number of ways the political and financial power base of Humboldt County can support and encourage any such efforts. As we have stated on a number of other occasions, See CA Collectives – Sky Falling, we believe the use of Cannabis Cooperative Associations is the most effective way a group of cannabis cultivators can seize control of their destiny.
We have specifically addressed this article to Humboldt County because it has so many growers and such limited resources aside from its cannabis industry. No other county appears to be so dependent on cannabis cultivation for its financial welfare. However, any group of cannabis cultivators can use a Cannabis Cooperative Association to avoid being at the mercy of the financial interests that are taking control of California’s cannabis industry.
We encourage cannabis cultivators throughout California to utilize the vehicle the legislature gave them in SB 94. Long-term survival for many California cultivators will likely depend on banding together through Cannabis Cooperative Associations.
Wake Up Humboldt County
Eek Another Regulator
Eek Another Regulator – the nightmare of nightmares I happened upon yet another cannabis regulator in California…I have to admit that this one has me dumbstruck…never knew it was there…and am still trying to figure out where it came from. [I am just waiting for everyone to tell me that they knew about it and I am the only stupid one that didn’t know about it…how could the cannabis industry in California possibly live without another regulator?
Our view is that this is an absolute SHIT SHOW…about the very last thing that the cannabis industry in California needs right now. We are posting a short version of the nightmare, and we update as quickly as we can get our hands around this. Its website is HERE.
The agency is called the California Cannabis Authority [yet another “CCA”] and here is the short version:
The California Cannabis Authority is a Joint Powers Authority established by county governments to develop and manage a statewide data platform. The platform will help local governments that are regulating commercial cannabis activity by proving critical and actionable data to increase tax realization, enhance public safety and augment planning capabilities.
The data platform aggregates data from multiple sources including track and trace, point of sale, taxation and socioeconomic data. By combining all of these data points, local governments will be provided with targeted and defensible data, ensuring that what is being reported and what is occurring truly coincide.
The data platform can be used to ensure that adequate tax payments are being made; assist local law enforcement and code enforcement officers with accurate and defensible information for speed of compliance; provide public health officials with product information, including product origin and product flow; and inform community planning efforts by understanding locations, concentrations and potential past or future land use patterns. CCA’s data platform will provide local governments with a number of secure log-in connections to access clear, accurate and real-time data on cannabis activity within their jurisdiction.
The data platform can provide necessary information to financial institutions that wish to work with the cannabis industry. Despite the conflict between state and federal law, it is possible for financial institutions to serve cannabis businesses now, but it is not easy. To accept cannabis customers, financial institutions must comply with the rigorous monitoring and reporting requirements and accept a significant amount of risk. Institutions must make sure cannabis businesses are not violating state laws or engaging in any other illegal activities.
For each cannabis customer, financial institutions must complete special money laundering and suspicious activities reports. These are onerous requirements that demand extensive staff time. Despite Attorney General Sessions’ recent action which rescinded Department of Justice guidance known as the “Cole Memo”, there are roughly 400 financial institutions nationwide that work with cannabis clients.
The burden can be eased if financial institutions are able to obtain detailed information on each cannabis customer, formatted to fit the institution’s regulatory reporting requirements. Financial institutions cite the single most important step California can take to encourage cannabis banking under current state and federal law is to provide them comprehensive licensing and regulatory data on cannabis businesses.
The CCA’s By-Laws can be found here.
CCA currently has six member counties. If you are a business that is regulated by the county of Humboldt, Mendocino, Yolo, Monterey, San Luis Obispo, or Inyo County, you are in CCA’s jurisdiction. Each member county has a different timeline for imposing data sharing requirement.
Yes, I am in a CCA-regulated county.
Your county is a member of CCA and requires all applicants and permitted cannabis businesses to share data directly with CCA. The purpose of a direct connection to CCA is to provide your local regulators with up-to-date information directly from the source to ensure that local compliance and enforcement efforts are directed towards those businesses that are not abiding by the law. CCA is not a tracking service and is not a duplication of the state’s track-and-trace system. Our purpose is to consolidate existing data sources into one platform so that local regulators can verify information from multiple sources, and have a better understanding of the commercial activity taking place within their jurisdiction. To operate in your county, you will need to provide CCA with commercial cannabis data directly through your 3rd Party Software Provider, or manual data submission.
How do I provide CCA with my data? You will need to provide CCA with commercial cannabis data directly – either through your 3rd Party Software Provider using an Application Programming Interface (API) connection, or through weekly manual submissions. For convenience, our connection method is the same process for how your business can transmit data to METRC, the state’s track and trace system – through either an API connection or direct upload.
3rd Party Software Connection – CCA does not require businesses to use any particular software, and we do not endorse specific vendors. As we approve Vendors, CCA will list them on our website.
If you are already using a 3rd Party Software Provider, please make sure they are an approved CCA Vendor, or contact them to let them know you are required to connect with us. CCA will work with all 3rd Party Software System Providers and will work with any interested Vendor to ensure they are approved by CCA. New vendors are being approved on a regular basis. See the list of CCA-approved 3rd Party Software Providers.
Eek Another Regulator
CCIA Policy Conference What’s Missing?
CCIA Policy Conference What’s Missing? – On Wednesday, March 20, 2019, the California Cannabis Industry Association (“CCIA”) will host its 4th Annual Policy Conference in Sacramento, California. The conference has a notable line-up of representatives from the legislative and administrative branches of California government, including Nicole Elliott, Senior Advisor on Cannabis, Governor’s Office of Business and Economic Development; Hon. Wendy Carrillo, Assembly, District 51; Hon. Reggie Jones-Sawyer, Assembly, District 59; Hon. Scott Wiener, Senator, District 11; Hon. Scott Wilk, Senator, District 21; Hon. Ricardo Lara, Insurance Commissioner; Lori Ajax, Chief, Bureau of Cannabis Control; Christina Dempsey, Manager, California Department of Public Health; Nicolas Maduros, Director, California Department of Tax and Fee Administration; and Richard Parrott, Director, California Department of Food and Agriculture.
The conference also has an impressive line-up of keynote Speeches, Presentations, and Sessions. There are keynote speeches from government representatives as follows: Hon. Ricardo Lara, California Insurance Commissioner; and Nicole Elliott, Governor’s Office. There is another keynote speech of particular interest to us for the reasons discussed below: Importance of Associations: Taking a Closer Look, Saphira Galoob, The Liaison Group.
There are a couple of Panels that are certainly timely in view of the description of California’s regulation of its cannabis industry by those who claim to be most knowledgeable regarding the cannabis industry as maladroit: State of Cannabis Regulations, moderated by Sean Luse, Berkeley Patients Group; and 2019 Policy Development & Legislation, moderated by Amy Jenkins, CCIA.
There are also a couple of Sessions that should prove interesting: Challenges and Opportunities in Cannabis Testing, moderated by Emily Richardson, CW Analytical Labs; and Distribution: The Gateway or Cog to Stability, moderated by Elizabeth Conway, Surterra Wellness.
There are four Workshops that should prove helpful for some attendees: Ensuring the Cannabis Industry, moderated by Stacey Jackson, Golden Bear Insurance; Compliance: An In-Depth Look at What You Need to Know, moderated by Henry Wyckowski, Wykowski Law; Branding – The Experts Weigh in on What You Need to Know, moderated by Robert O’Shaughnessy, The Higher Ground Agency; and The President Signed the 2018 Farm Bill, Legalizing Hemp – What Next for Cannabis Businesses?, moderated by Kristin Nevedal, International Cannabis Farmers Association.
The preceding summarizes the apparent coverage of CCIA’s 4th Annual Policy Conference. Most of our readers will have seen one or more advertisements for this conference so the preceding provides nothing new. We have written this note, however, to question why it appears so many significant policy issues for California’s medical and adult-use cannabis industry are not being addressed at this conference.
Let us start with some broad policy questions that we believe should be asked. Why has California’s roll-out of its regulatory structure been described as “maladroit” in s recent financial analysis of the cannabis industry? Why have so few individuals who have involved California’s cannabis industry prior to the first steps toward regulation not been able to become incorporated into a regulated industry? Why did California fail to collect millions of dollars in tax revenue that it projected it would collect? Why do California’s cannabis regulatory agencies so frequently appear to be working at cross purposes to California’s cities and counties? Why does it appear neither CCIA nor California’s cannabis regulatory agencies are interested in developing more effective coordination of the cannabis industry with California’s cities and counties?
There is a keynote speech – Importance of Associations: Taking a Closer Look – but both the interests of independent cannabis businesses and associations of California cannabis businesses appear to be unrepresented at the conference. Where is the California Association of Independent Dispensaries? Where is the Association of Los Angeles Dispensaries? Where is the Sierra Foothills Growers Association? Where is the California Growers Association? Where is the Southern California Growers Association? Where is the Association of Delivery-Only Dispensaries?
Let us return to the missing tax dollars. The simplistic answer given by many is that cannabis taxes are too high and California’s cannabis regulations are too onerous. The failure of the California Department of Tax and Fee Administration (“CDTFA”) to require financial record-keeping and tax return reporting that ties into such financial record-keeping is a far more significant cause of the failure of CDTFA to collect the taxes it should have collected from licensed businesses. California cannot reasonably expect to collect the taxes it should collect if it does not require California cannabis businesses to keep accurate and complete financial records. California has also made it unnecessarily difficult to become a licensed and regulated cannabis business. California cannot expect cannabis businesses to become taxpayers if it does not make it easy to become a regulated cannabis business.
Let us turn to another topic. Have California’s legislative and administrative policymakers forgotten that Proposition 64 preserved all of the rights granted to Californians under Proposition 215? [See Keeping the Promise of Proposition 215] Most of the policymakers who are molding California cannabis industry at the present time have forgotten, or never knew, that former Governor Brown very likely did more to shape California’s cannabis industry with his 2008 memorandum when he was Attorney General than any single policymaker. The principles expressed in that memorandum remain valid today. The Proposition 215 rights granted Californians were preserved in Proposition 64. Medical cannabis distribution will begin making a comeback in California as soon as the financial advantages of medical cannabis over adult-use cannabis again come to the forefront.
Let us close by positing a broad policy question that cuts across all of cannabis regulatory agencies and cannabis regulations that have created such confusion and turmoil throughout California’s cannabis industry. Did California’s cannabis regulatory agencies err in failing to follow two underlying principles in their approach to regulation? We believe California should have adopted the two principles that follow. First, California’s cannabis regulatory agencies should have deferred all issues relating to land use and public health and safety to local jurisdictions to the maximum extent possible. Second, to the maximum extent possible California’s cannabis regulatory agencies should have made it as easy as possible for California’s existing cannabis businesses that were locally acceptable to become California licensed cannabis businesses.
LA Cannabis Licensing – Mess
LA Cannabis Licensing – Mess As the marijuana market in the Golden State grows and matures, business owners are facing dueling challenges:
- MJ entrepreneurs are finding it’s particularly tough to obtain a business permit in Los Angeles.
- Lawsuits involving trademarks and proprietary business information are popping around the state.
L.A. stuck in neutral?
Los Angeles has long been touted as among the biggest municipal markets in the world for the cannabis industry. However, it remains in a “hurry-up-and-wait” mode, which is frustrating hundreds of businesses waiting to tap the city’s potential for commercial marijuana rollouts.
In short, MJ business owners are facing a licensing quagmire.
The city issued permits for 169 retailers, but zero for growers, distributors, edibles makers, testing labs or other types of plant-touching businesses.
According to the L.A. Department of Cannabis Regulation (DCR), the city received nearly 600 applications for business permits for its second round of licensing – which opened in August and closed Sept. 13.
The licensing involves businesses that qualify under L.A.’s social equity program and are part of the existing MJ supply chain.
Of those, 334 paid application fees and are being processed. Also, 11 testing labs were “granted temporary approval,” a DCR spokeswoman wrote in an email to MJBizDaily.
LA Cannabis Licensing – Mess
But to date, no Phase 2 licenses have been issued, according to an email from Jason Killeen, a DCR assistant executive director.
“We are working very closely with the State to ensure that our Phase 2 applicants have an opportunity to apply for a temporary license before the end of the year,” Killeen wrote to MJBizDaily.
Here’s why the timing of the temporary licensing is important:
- Temporary cannabis business licenses from the state won’t be available to new industry entrants after Dec. 31. And the three state agencies that grant permits are warning potential applicants they may not get a temporary license if their applications are turned in after Dec. 1.
- Why the warning? The agencies report they may not have enough time to process applications to issue temporary licenses before the end-of-the-year deadline.
- This is important because local authorization is still required for any state license. Consequently, any of the hopeful L.A. marijuana business owners that don’t have a city permit before 2019 could be forced to apply for a full annual state permit instead of a temporary state license.
LA Cannabis Licensing – Mess
Applying for a full annual license, however, is far more complicated.
“Applying for a temp license is like filling out a sandwich form, but the annual license is like applying for college,” said Terra Carver, executive director of the Humboldt County Growers Alliance.
Moreover, the city will be launching a third round of licensing.
It will involve “general” applicants – basically, everyone else that doesn’t yet have a permit and doesn’t qualify for a social equity license. There’s no word on when that may begin. But it won’t be easy to get such a permit.
More lawsuits involving business competitors are emerging as the California cannabis industry grows.
There’s the ongoing litigation between L.A. consultancies SIVA Enterprises and Cirrata Ventures.
More recently, longtime Humboldt County cannabis businessman Craig Nejedly filed suit on Nov. 2against Santa Rosa-based CannaCraft.
Nejedly runs Talking Trees Farms, a licensed grow, and a hemp clothing line, Satori Movement. He alleges in his civil lawsuit that CannaCraft infringed on his trademark of the word “Satori” by debuting an edibles line bearing the same name.
CannaCraft executives did not immediately respond to a request for comment. (CannaCraft also controls at least two other cannabis businesses, according to its website: Care By Design, which specializes in CBD tinctures, and AbsoluteXtracts, a concentrate, and vape cartridge maker.)
The suit asks the U.S. District Court in Northern California to bar CannaCraft from using the name “Satori” and related trademarks in the future. It’s seeking monetary damages. What the Satori lawsuit drives home, once more, is how dicey legal issues will proliferate for marijuana businesses.
It’s no longer a game for rulebreakers. Rather, it’s a highly regulated industry that will be governed by the courts and lawmakers – not rebel entrepreneurs who invent their own business rules.
LA Cannabis Licensing – Mess
Fontana Ordinance Struck Down
Fontana Ordinance Struck Down – San Bernardino County Superior Court Judge David Cohn has issued a ruling striking down parts of a City of Fontana ordinance placing restrictions on residential marijuana growers in the first court case limiting a local jurisdiction’s ability to regulate personal cultivation rights in California under Proposition 64 (AUMA).
The ruling is the result of a lawsuit filed against the city by the Drug Policy Alliance and the ACLU (at the urging of Cal NORML) on behalf of plaintiff Mike Harris, a retired ironworker and registered nurse seeking to cultivate marijuana in his Fontana home to ease his arthritis and pain from past injuries.
“The issue, in this case, is how far a city can restrict the category of persons who are entitled to grow marijuana plants, and the circumstances under which they may grow the plants, without running afoul of the AUMA’s requirement that the regulations be ‘reasonable.’ The City of Fontana has gone too far,” wrote the judge.
The ruling leaves in place the requirement to obtain a permit for indoor cultivation but disallows the $411 initial permit fee and the $230 annual renewal fee, instead of requiring the city to re-evaluate the cost of permitting based on the required changes to its ordinance.
Fontana Ordinance Struck Down
The ruling eliminates virtually all of the permit requirements plaintiffs objected to. Specifically, it:
• Eliminates all qualifications for the applicant other than that they be at least 21 years old. Gone are the requirements that a person not have certain felony convictions, be live-scanned, and not have any outstanding code enforcement actions or payments owed to the City.
• Eliminates the requirement that there be only one “cultivation area” in a dwelling.
• Eliminates the requirement that a “cultivation area” be used exclusively for growing marijuana.
• Eliminates the prohibition on storing chemicals and explosive gases in the “cultivation area”.
• Eliminates the requirement that the cultivation area is accessible by only one locked door, and that all windows, skylights, etc. in the area be lockable.
• Eliminates the requirement that the cultivation area is accessible only by a permit holder.
• Eliminates the requirement that the residence where cultivation takes place have all plumbing, electrical and other utilities “properly permitted by the City”.
• Eliminates the requirement for a building inspection of the premises prior to issuing a permit.
Fontana Ordinance Struck Down
“The remainder of the Ordinance may remain, although Fontana may wish to draft a less onerous ordinance instead,” the ruling states.
“We hope that this lawsuit serves as an example for other cities that have passed or are considering similar ordinances,” said Joy Haviland, staff attorney at DPA.
Prop. 64 requires local jurisdictions to allow 6-plant marijuana gardens for personal use but permits them to “reasonably regulate” the gardens. Regulations can include forcing gardens indoors; however, locals lose the ability to apply for grants to pay for law enforcement and other services if they ban personal outdoor gardens.