SANTA CRUZ >> In two weeks, Santa Cruz County’s most valuable crop becomes legal for recreational sale.
Local cannabis dispensaries — one of which received almost half of the state’s first batch of temporary licenses — say they are ready to roll out the green carpet for adult customers come Jan. 1.
But many representatives of the industry say that even as new doors of economic opportunities open, they are struggling to sift through a pile of new state and local regulations and taxes. Consumers should expect to pay upward of 45 percent in taxes at the register, while cannabis businesses — from cultivation to retail sale — are required to pay tens of thousands of dollars for state licenses.
Because it has never been fully regulated, the full scope and size of Santa Cruz County’s cannabis industry is difficult to know. But in a county known for its agricultural output, pot in 2016 was almost certainly the most valuable crop. About 245,000 pounds of pot were grown in 2016, according to a county report, worth about $437 million at wholesale prices. The rest of the county’s agricultural output the same year, by comparison, was worth $637 million.
Dispensaries, of which the county has the second most per capita behind Mendocino, did a comparatively modest $36 million in sales the same year.
How much sales will increase in the new year is unknown, with predictions ranging from 10 percent to more than two-fold increase. The county expects to make at least a few million dollars in additional tax revenue in 2018. Economists predict the state could see as much $1 billion in added tax revenue.
But an estimated 72 percent of the state’s jurisdictions aren’t ready to allow recreational sales, with many officials saying they simply need more time.
While some big cities including San Jose, Oakland, Los Angeles and San Diego are ready-to-go for New Year’s Day, others such as San Francisco are lagging anywhere from days to months behind or taking a wait-and-see stance.
In Santa Cruz, meanwhile, both the city and county were among the first to give the green light to the 14 dispensaries within their respective borders.
Cannabis is as woven into the culture of Santa Cruz County as it is into the canvas cloth of pre-prohibition America, according to Jim Coffis, deputy director of industry group Green Trade Santa Cruz. He said the first joint he ever smoked some 50 years ago, while a Stanford undergrad, was grown in the Santa Cruz Mountains.
As Coffis tells it, San Francisco hippies moved north and south after the summer of love with many ending up buying then-affordable land in the Santa Cruz Mountains. There he said cannabis cultivation grew hand-in-hand with the organic farming movement before both spread their seeds across the state.
“The history and the legacy of cannabis cultivation is very much a part of Santa Cruz culture and it always has been,” said Coffis. Legalization, according to Coffis, presents a new frontier. But he said in the face of regulatory uncertainty and a new county tax structure seen as overburdening by the industry, many growers have begun seeking greener pastures in Monterey and Salinas and others are likely to remain in the shadows.
“Santa Cruz has a big opportunity here if we don’t blow it,” Coffis said.
Santa Cruz County Cannabis Licensing Manager Robin Bolster-Grant said the newly minted 7 percent cultivation tax is comparable to other jurisdictions and that her office’s role is to balance interests of the industry with that of the rest of the community, including environmentalists and rural residents who worry about potential negative impacts of cannabis grows on animals, water, and as potential fire risks.
“Santa Cruz is unique, and has a unique history with cannabis,” Bolster-Grant said. “That’s the art and the science to balance — to protect the industry to navigate this new frontier, but certainly not at any cost.”
Retailers Ready To Roll
It’s lunch hour at the KindPeoples medical marijuana dispensary’s new DuBois Street location and a stream of medical patients are filing out with discrete paper bags in hand.
The renovated interior is lined with glass shelves displaying rows of golden-green buds and a wide selection of edibles, vaporizers, tinctures and topical ointments.
The dispensary, which received the lion’s share of the state’s first batch of temporary licences, plans to open early at 7 a.m. on Jan. 1.
The aim is to be the first in the area to sell recreational cannabis. To further commemorate the moment, its first 420 customers on what’s being called “Legalization Day” will walk away with a free T-shirt.
KindPeoples Director Khalil Moutawakkil said his staff is ready to guide cannabis first-timers and veterans alike to the perfect product to suit their want or need.
“We’re excited to show a lot of the folks who are procuring their cannabis from non-regulated sources that this is the new paradigm — retail dispensaries are offering a wide array of lab-tested products they’ve likely never seen before,” Moutawakkil said.
The first question new customers will be asked: intoxication or no intoxication?
“It’s my personal belief that cannabis is for everyone,” Moutawakkil said, explaining that there are many uses for the plant and its extracts that don’t involve psychoactive effects.
KindPeoples, founded in 2014, has grown almost as rapidly as the plants it distributes. Its staff of a dozen in 2014 has surged to more than 80 employees.
In Soquel, Santa Cruz Veterans Alliance operators said they also expect to be ready for recreational business come Jan. 1. Already approved for recreational sale by the county, they expect their temporary license to roll in the next two weeks.
The alliance recently expanded its growing operations to a 5,000-square-foot warehouse in Watsonville.
Co-founder and U.S. Navy veteran Seth Smith said the alliance sees opportunity in the new recreational marketplace.
But he said the future of the alliance’s central mission — providing free cannabis to veterans with a medical need — is less clear.
Medical Left Behind?
Longtime medical-cannabis advocates such as Valerie Corral worry that under the system, it’s the severely ill, low-income patients who could be left hung out to dry.
“What it turned into now is not what changed people’s hearts and minds,” said Corral, who did not support the 2016 voter-initiative that ushered in recreational use. “What changed people’s hearts and minds across America is that people are suffering.”
Corral is no stranger to regulatory uncertainty. She founded and operates the nation’s oldest cannabis collective, the Wo/Men’s Alliance for Medical Marijuana, in 1993. Since then, she has persevered through saga of arrests, federal raids and court cases to carry out her mission to provide cannabis to chronically and terminally ill patients.
The Wo/Men’s Alliance has no intention of selling recreationally, Corral said. But it will need to raise more than $100,000 to pay for renovations and licensing to comply with state law.
“We can figure it out and make that our burden, not make it the burden of someone who has 10 days to live,” Corral said.
For more than two years, the Veterans Alliance has distributed free cannabis to its members, all of whom are veterans with medical recommendations. More than 100 vets attend its monthly meetings at the grange, Smith said. As of Jan. 1, passing out cannabis at those meetings will become illegal.
Instead, Smith said the alliance is going to experiment with a new model where it essentially purchases cannabis from itself by paying all required taxes. At its monthly meetings, instead of cannabis veterans will be given a voucher which they can redeem at the alliance’s licensed dispensary throughout the month.
Other concerns raised in the face of such a massive legal shift include a perception that the complex and extensive regulations could push out small businesses in favor of large corporations.
“The way that the state is handling things right now in my opinion is pretty disgusting,” said Colin Disheroon, founder and CEO of Santa Cruz Naturals, a cannabis collective and dispensary. “It’s really enabling the biggest corporate players.”
The one thing agreed upon by all stakeholders is that exactly how recreational cannabis will impact Santa Cruz County, California and beyond — whether green revolution, tax bonanza or ecological disaster — is impossible to know for certain.
Looking to the example set by Colorado, Washington and Oregon is only helpful to a point, said Coffis, because California’s economy is so much larger.
“We could go around in circles until the cows come home trying to make sense of this and trying to understand whether it’s good, bad or ugly,” said Moutawakkil. “But at the end of the day, this is what we have.”