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SLO County grapples with a $3.2 million loss on cannabis



San Luis Obispo County supervisors discussed the county's struggling cannabis program on June 22, with staff highlighting a $3.2 million net loss since 2018 and a dearth of operational businesses.

GOING SLOW With only 20 active cannabis operators, SLO County has lost $3.2 million from its cannabis program in more than three years. - FILE PHOTO
  • File Photo
  • GOING SLOW With only 20 active cannabis operators, SLO County has lost $3.2 million from its cannabis program in more than three years.

After nearly four years, SLO County has 20 permitted and licensed cannabis operators with their doors open, including just 15 total acres of cultivation. The end result for the county's coffers: a $3.2 million deficit and ongoing hit to the general fund.

"That's tied to production," SLO County Chief Administrative Officer Wade Horton told the Board of Supervisors. "When you look at the acreage that's in production today, it just does not generate enough tax revenue to cover the cost of the program."

According to cannabis industry members, the slow rollout is a result of SLO County's cumbersome permitting process, which can keep applicants in the project review stage for several months or even years. When projects do make it to the finish line, neighbors' appeals or lawsuits can torpedo them, they said.

"Three and a half years later ... we still feel really stuck," said Jamie Jones, owner of Kirk Consulting, which represents and advises cannabis applicants in SLO County. "I've never done anything harder in my life when it comes to land use."

The Board of Supervisors—which is split in its sentiments about cannabis—voted on June 22 to make a handful of policy changes aimed at moving the industry forward and solving its fiscal shortfall.

"It's a matter of getting acreage in the ground," 2nd District Supervisor Bruce Gibson said.

By 3-2 vote, the board reversed an environmental review policy that had put the onus on cannabis applicants to produce full CEQA (California Environmental Quality Act) analyses for their projects. Instead, SLO County will commission a "programmatic" environmental impact report for the county as a whole—an approach taken by other localities, including Santa Barbara County.

"In hindsight, I think the biggest judgment error we made was to not prepare a program-level EIR," Jones said. "What we're seeing is very organized opposition. They're using CEQA as an opportunity to stop projects. ... Our farmers need that coverage."

Critics of the local cannabis industry opposed that move. Arroyo Grande resident Susan Mayer, speaking on behalf of the SLO Cannabis Watch Group, said that the county shouldn't foot the bill for an industry EIR that's projected to cost $850,000. The supervisors, in response, asked county staff to explore ways to make the industry pay for it.

The supervisors will also freeze the county's cannabis tax—which was set to increase to 8 percent of gross receipts on July 1—at 6 percent. The board greenlit a new fee study aimed at better recouping cannabis costs. It also moved to reestablish a county cannabis subcommittee and fund a multi-department compliance monitoring team.

Cannabis business leaders criticized the county for asking a small number of operators to pay higher fees.

"It seems that a fraction of the operators are being asked to foot the bill for the entire program," said Adam Laurent, of the Central Coast Cannabis Council. "What if we focused on improved performances on on-boarding?"

Supervisors shared differing views for why the industry has struggled locally. Fifth District Supervisor Debbie Arnold cited the level of neighborhood opposition to cannabis projects.

"It surprised me the amount of conflict we're seeing out in the unincorporated area," Arnold said. "The permitting process to me is just about ensuring compatibility and reducing community conflict."

Gibson blasted the board for creating a cannabis program that he said was set up to fail.

"This Board of Supervisors has not articulated a coherent policy framework based on a shared commitment to see this industry [succeed]," Gibson said. "This isn't going to change until you get a coherent commitment to cannabis or a clear declaration that a majority of this board doesn't want to see cannabis. It's got to be one or another."

First District Supervisor John Peschong contrasted SLO County's program to Santa Barbara County's, which has more than 300 acres of cultivation approved and is projecting nearly $17 million in annual tax revenue.

Peschong said he generally favors SLO County's slower and more discretionary approach but acknowledged the system is currently bogged down by regulation.

"It does sound like Big Government has met cannabis," Peschong said. "I've always kind of been a little-government person. I think we need to find a way to streamline this." Δ

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