I’ve written this piece to offer some framing and understanding to decide how to vote on Measure A (Sonoma County’s cannabis tax up for vote March 7, 2017). Go to the Sonoma County website for the details of the tax measure and all the records of deliberation this past year.
I’m not going to suggest you vote yes or no on Measure A. Rather, I want to pose questions that might help you decide.
California is taxing cannabis to the tune of 15% excise on the retail end and roughly the same percent of tax (by weight rather than gross receipts) on the growers. Standard sales tax (7.5%) still applies at retail. There will have to be some reconciliation between MCRSA and Prop 64 to see how medical cannabis will be treated. As it stands now the amount of tax applied in the supply chain will add to consumer prices by about 30%.
Alcoholic beverages, tobacco, prescription drugs and over-the-counter drugs come to mind for comparison.
Alcoholic beverages, OTC drugs, and cigarettes are subject to the standard sales tax (8.5% average in this region). Prescription drugs are exempt.
Alcoholic beverages and cigarettes are subject to federal and state excise taxes. Cigarettes are taxed the most nationwide, with CA adding $2.87 per 20-pack. CA state excise taxes for alcohol is $0.20 per gallon of beer and wine, and $3.30 and $6.60 for spirits depending on per volume alcohol content.
Sonoma County doesn’t tax either of alcohol or cigarette products beyond its share of the standard sales tax, which is about 1%. In Illinois, Cook County and Chicago both tax cigarettes (the highest nationwide) at the combined rate of $4.18 per pack. The local tax generated was near $170 million in 2014.
We can further segregate these similar products along the lines of medicinal value. Cannabis, OTC and prescription drugs fall into that spectrum. Alcohol and cigarettes don’t. That explains some rationale for tax distinction, i.e. we like to tax the vice stuff and not the medicinal stuff. Cannabis falls into recreational and medicinal, a real conundrum.
We also don’t tax food intended for home consumption and preparation.
What about the other major stuff we don’t tax, like services? In Sonoma County alone, billions of dollars in service transactions occur each year that isn't taxed. Most sales tax regulations were put in place in the 1930s when product consumption was dominant and services were minor.
The main reason that services aren’t taxed in California is due to legacy bias (gee, we haven’t done that before) and fear of resistance from the industry groups adversely affected. Some states do tax services, and boy did the business community put up a mighty fuss that was enough to block implementation in a few cases.
Keep in mind that most of what the cannabis industry needs from local government services will be covered in permits and license fees they’ll pay, just like other sectors operate.
The state will also send cannabis tax revenue to local governments. The problem at this point is that nobody knows how much will trickle down with the exception of sales tax. This leaves local governments without a plan to fund extraordinary events should they occur.
The cannabis sector is a major contributor to our local economy. I estimate that based on today’s wholesale pricing of cannabis, Sonoma County production is between $2 to $3 billion annually. For contrast, wine grapes came in at a little over one-half billion dollars in crop value in 2015. By the time you add up the economic multipliers from cannabis activity you can at least double the impact.
The fact that cannabis is an agricultural product is a significant benefit to Sonoma County. It integrates more readily into an already strong agricultural economy and mature business infrastructure. Those are necessary conditions to support a sector for growth and competitiveness.
From that agricultural perspective, consider that dollar for dollar of crop value, cannabis will outperform every crop we have now (though mushrooms may be a contender) and use a fraction of total resources, i.e. less land, water, etc. to achieve a higher level of productivity.
I don’t think it’s necessary to demonize parties on either side of this issue. Cannabis businesses are somewhat like any business operator—they don’t like to pay higher taxes than the next guy. Local governments are always looking for funds to carry out the mandates of a hungry citizenry for a host of services.
That being said, the cannabis sector is under siege from the federal and state level—one for criminality and the other for posing a major tax burden. They can’t bank easily and are required to pay income tax federally, but can’t use standard deductions. Generally, we subsidize and provide a foundation for industries that contribute to our local economy. We tax heavily the things we don’t want or want to reduce.
Sonoma County has to reconcile where it stands. There are differing opinions. Some folks act as if regulating cannabis is equivalent to halting the spread of a venereal disease while others view cannabis as a godsend. I find that a lot of people are shocked when they learn that 51,000 Sonomans voted for Donald Trump, but they did, and that indicates our political diversity.
Please vote your conscience on March 7th. At least you vote and engage. That’s good for all of us regardless of the outcome.
December 8, 2016
This is a presentation I gave at the final Women’s Grow event in Sonoma County. Just in case the embed isn’t working, you can click here to view it on another site.
I offer this observation: 71,000 non-cannabis consuming voters in Sonoma County voted yes on Prop 64. About 65,000 cannabis consumers voted yes (while some others voted no).
That means more non-cannabis folks voted for it than cannabis consumers.
That’s encouraging in the sense that it reflects a society that treasures freedom of choice on personal matters, even when the choice isn’t a self-interested one.
Call it enlightened self-interest. It’s a profound confidence in treating each other as responsible adults who can decide for ourselves what’s good for us. We know to grant that right to others as we’d like to have it for ourselves.
Dang, that sounds a lot like the Golden Rule too.
How many dispensaries can the county support to encourage competition and innovation, provide convenient access for consumers and maintain a good balance that reduces the threat of creating a boom and bust cycle? This analysis assumes that AUMA passes and retail includes medical and recreational use.
This is really no different than how we might approach grocery or shoe stores. There is anticipated demand and supply. Match them as closely as possible with an aim to land on the side of surplus. We already know that we export at least 90% or more of cannabis production in Sonoma County; so, the surplus I’m referring to is on a consumer retail level.
Here’s what it looks like for shoe sales and the number of shoe stores in Sonoma County.
The national median sales for a shoe store is $800,000 per year. Sonoma County shoe stores average $864,000. So, that’s about the right number of shoe stores for this area based upon supply and demand. Our local shoe retailers face the biggest challenge from Zappos and other online shoe retailers snagging our local market share.
*Bear in mind there are other stores that sell shoes as a tertiary product line along with other merchandise that represents the primary line.
Consumer demand is roughly $125 million to $200 million per year for locals. If AUMA passes we can anticipate another 10% bump in sales by tourists.
What is the smallest size a cannabis dispensary can be and still make a healthy, viable and sustainable business?
My guess is sales between $750,000 and $1 million per year; so, let’s say $1 million for our calculations.
The simple calculation of demand at a median point $160 million per year divided by the minimum size store ($1M) that could be supported, is 160 dispensaries.
Now, of course, markets don’t divide neatly in that manner; so, maybe we want to avoid burn and churn and just license 50 dispensaries throughout the county in the early stages. That stirs a healthy competition that could yield $2-3 million per year for the smaller players.
That should create ample competition among the dispensaries to better serve consumers and reduce the failure rate for dispensaries.
I estimate there are 65,000 to 70,000 cannabis consumers in Sonoma County. They would have 50 choices of where to go. The top 10-15 dispensaries would claim most of the market share (the current 9-10 incumbent dispensaries) selling between $5-$15 million per year each. But this would open the field for retail innovation and growth, especially for canna-tourism. It would also generate powerful economic multipliers for the real estate and the building sectors, as well as professional services, not to mention retail sales positions would be more plentiful.
Who knows, we might have the first dispensary shoe store combo.
During the 1920s alcohol prohibition, one zealot suggested that “liquor law violators should be hung by the tongue beneath an airplane and carried over the United States”. Another suggested that the government should poison liquor supplies through the bootleggers distribution, even though she admitted that several hundred thousand Americans would die as a result, she said it was worth the price.
Without doubt, those suggestions represent a fanatical extreme, but it also exposes the underlying psychosis of a movement, septic in an individual, and dangerous to society when fused in the collective. What began as a ban on alcohol degenerated into a cruel assault on those who drink.
Advocacy for alcohol prohibition began in the early 1800s and was fought over a century until the 18th amendment was enacted to prohibit the production of alcohol in 1920. How 500,000 vocal and well-organized prohibitionists triumphed in forcing their moral will over the personal choices of 99 million mostly complacent non-drinkers and disorganized wets is a triumphant story of master politics. It was also an example of our government’s failure to effectively legislate and sustain the unenforceable.
The promise of the drys going into prohibition was that it would create an economic boon. The same promise was made by the wets in repealing prohibition. Neither was correct, although the economic gains after prohibition were more evident.
Alcohol prohibition lasted thirteen years, while cannabis has dragged on for more than eighty years.
Here we are in Sonoma County, plopped smack dab in the middle of the world’s center of cannabis production exiting a long-running prohibition of cannabis. Now we’re entrusted with the singular task of disentangling ourselves from this barbed bramble of federal government social fencing. The rest of the world is watching and wondering, will we get it right?
Will we preserve the current 10,000-15,000 entrepreneurial and employment positions and the cultivating operations that have pioneered this industry in our county?
Based on research into cannabis cultivation practices and yields per square foot for indoor, greenhouse and sun grown operations, it’s estimated that Sonoma County growers, numbering around 9,000, produce between $3 to $3.5 billion per year for the wholesale cannabis market. Local residents consume about $150 million of that supply and the rest is exported.
Sonoma County’s regulatory bodies have to absorb a mature, fully functioning sector of the economy that is larger than any other sector in terms of jobs and gross production. That’s a tall order for the regulators and the regulated. The odds are stacked against a smooth process. But, our economic health hangs in the balance.
If we get it wrong and don’t usher in a period of compliance and regulatory peace, then we stand to lose a significant portion of our current economy. Bear in mind that if our cannabis wholesale production is indeed $3.5 billion, then approximately $3 billion of that is presently expended in labor, goods and services locally.
A loss of that magnitude is not just a dent in Sonoma County’s $23 billion economy. It’s 13% of our economy. That’s the equivalent of a celestial body half as big as the moon colliding with planet earth. For geography buffs, that would wipe out most of Asia. Ouch.
Move as many commercial cultivation sites as possible to outdoor and greenhouse on agriculturally zoned lands. This will be particularly difficult for growers who have specialized with indoor grows in residential neighborhoods. The skill set needed to grow indoor and outdoor is very different. Education will be required if a grower doesn’t possess those skills; so, training programs need to be available. Which organization(s) provide that training is unknown.
In order to help in the transition mentioned above, there will need to be ways to accommodate those growers by allowing them to form cooperatives to share parcels of land with multiple permits and licenses. There will no doubt continue to be indoor cultivation within commercial buildings. There is, however, not enough commercial space to accommodate the transition from residential grow operations. We’re talking at minimum a need for 1.5 million square feet to meet demand. That would wreak havoc in the real estate market by absorbing everything available and then some. According to the Keegan & Coppin 2nd quarter 2016 report there was an estimated 1.4 million square feet vacant. It’s not likely to happen.
Streamline the licensing process (speed and ease) to allow for unlimited numbers of licenses, but restrict the canopy size to a maximum of one acre as prescribed in MCRSA (Medical Cannabis Regulation and Safety Act). Also, for at least the near future keep a cap on total acreage licensed for cultivation at 500. Keep in mind that Sonoma County growers can produce $3.5 billion on less than 500 acres. Allowing a large, diverse growing population of entrepreneurial farmers is the best strategy for producing amazing product and withstanding market dynamics. Limiting production will allow regulators and producers to stabilize under a new regulated system.
Keep in mind that Sonoma County growers can produce $3.5 billion on less than 500 acres.
The above suggestions align with a focused strategy for Sonoma County in the cannabis market. We have a chance to cream the market, i.e. skim the richest part of it. We can produce the best product in the world. The safest, purest products are grown and manufactured and the most sustainable operations are located in Sonoma County. Sonoma County cannabis sector sets the highest standards worldwide. That becomes our brand.
It’s a major undertaking to take that brand position and not without its risks. It requires tremendous coordination between regulators, policy makers and industry leaders and players. Regulation needs to create the least amount of friction for producers so they can focus on innovation and reducing costs to stay competitive. Producers have to be forever innovative and market-driven. Complacency and arrogance are the diseases that will kill any competitor trying to be king of the hill in the premium market. The cannabis sector will no doubt have a series of shakeouts over the next decade as more states approve medical and recreational use.
Sonoma County can stand strong and weather the changes sure to come if we can unify around strategy and support the producers in the impending transition.
Question posed by Paul Gullixson | August 28, 2016 | Press Democrat Newspaper
Paul, let me take a stab at answering your question.
Like you, I’m no expert on the cannabis industry, or on regulations and policy making. But as someone deeply involved in economic development work in Sonoma County, I have an abiding interest in making sure we get cannabis regulation right to preserve our local enterprises. It’s with that spirit that I respond to your questions.
You ask why “we” are so eager. By “we”, I assume you mean the policymakers moving forward on creating regulations and policies to govern cannabis activity in Sonoma County.
It seems a brisk pace compared to the usual longer time for government agencies to create regulations. Regulating cannabis means complex inter-agency coordination at the local and state levels. It’s a challenge to get it done correctly in a short period. I think we can both agree that the clock is ticking on deadlines, and we need rules and regulations in place by early spring 2017.
You acknowledge that when you said, “All the same, it’s one thing to get ready for changes in state law. It’s another to be rolling out the red carpet in hopes of becoming the capital of cannabis.”
The overarching need to move with speed has more to do with this fact—the cannabis industry already exists in Sonoma County to the tune of $3 billion or more. It’s not a startup as you imply.
Not only does it already exist, it employs an estimated 12,000 people in Sonoma County and impacts the incomes of many thousands of locals working in restaurants, hardware and home improvement and grocery stores among many other businesses. Uncertainty is a big destabilizer and can mess up a lot of lives if we don’t decide things soon and start a transition.
I’m compelled to point out that your news organization (the PD and NBBJ) has failed to shed light on the cannabis issue with depth or consistency for the past twenty years. This is a multi-billion dollar industry in Sonoma County right under your noses. It’s even bigger in the counties north of us. Lack of investigative reporting reflects poorly on the presumptive paper of record for this region. Cultivation value of cannabis is 3-5 times greater than wine grapes and uses less than one percent of the wine grape land area, and yet I can’t throw a bucket of ink in any direction without hitting a wine story in your publications every day.
A question back at you; “Why has there been a paucity of illuminating, investigative coverage for an industry that represents 13% of our local economy over the past twenty years from the Press Democrat and the North Bay Business Journal?”.
You ask why “we” want to become a magnet for the cannabis industry and you go on to ponder who decided that.
Cannabis has been one of Sonoma County’s biggest economic drivers for decades. Don’t confuse your recent awareness of it, or your organization’s recent awakening with the illusion that it hasn’t existed. Sonoma County is a magnet because of geography, a large population of skilled growers and a legacy of highly knowledgeable people in the industry. They established the industry here over time.
The question pressing us into service is not, “Do we want to expand the cannabis cultivation sector”, (I don’t think we need to), but “What will happen if we drive it away or lose any of the $3 billion circulating in the local economy today”?
Transitioning the existing population of 9,000 growers into compliance is the least disruptive route.
Other supply chain players represent growth, but we don’t know how much. We do know those jobs tend to be more technical and managerial, and presumably better paying. Like in wine, diversification of supply chain businesses gives Sonoma County a competitive advantage. Maybe that will be true in cannabis too.
You raise the issue of potential cannabis user abuse and the threat of people under 21 years gaining easy access. You also acknowledge the same problems with alcoholic beverage consumption, and ask if we really want to “fan the flames of social problems consuming our kids”.
As a rule, our society doesn’t abridge the liberties of the many for fear of the abuse by the few. The failure in violating that tenet was apparent in alcohol prohibition. What we try to do is rehabilitate the behavior of the few to continue the enjoyment of the many.
I agree with you this is a major challenge and effort should be applied to prevent abuse. As with alcohol, tax revenue from cannabis sales will go to programs to address abuse. By the way, as you stated, the abuse exists now; we just don’t have direct funds available to address the problem.
MCRSA legislation and the AUMA initiative pay respect to potential abuse by providing funding for preventative and rehabilitation programs through health departments.
We can fund those programs by bringing industry players into compliance and taxing them; and that only happens if the rules and regulations are fair. Otherwise, there is little incentive for them to exit the black or gray market.
To really grasp the problem in alcoholic beverage consumption, and thus be alert for a similar pattern in cannabis use, consider this:
4 out of 10 adults don’t consume alcoholic beverages at all. 3 out of 10 consume a light to moderate amount ranging from several drinks per month to several per week. The remaining 30% break down like this: 10% have 1 drink per night; 10% have 2 drinks per night; and the last 10% consume a minimum of 10 drinks per night. If the last group reduced their consumption to 2 drinks per night, alcoholic beverage consumption in the US would drop by 60%.
Colorado has reported similar findings in cannabis consumption, with the heaviest users at 22% consuming 67% of all cannabis consumed. What we don’t yet know with cannabis, is whether consuming 1.5 grams per day is an abusive level. Alcohol is more clearly understood—10 drinks a day is considered alcoholism.
Your comparisons to Colorado by quoting John A. Jackson of the Colorado Association of Chiefs of Police don’t apply in the way you intend them as a cautionary tale.
The hospitalization data from Colorado posit two disclaimers that you didn’t mention: 1) THC presence in blood tests may be indicated among a constellation of other substances and not the sole or actual reason for hospital admission, and 2) changes in data collection from one agency to another year to year may have skewed the results.
As a side note, I saw one national news report claiming that child ER admissions in Colorado rose 600% related to accidental cannabis ingestion. In fact, during one year the number of cases went from 2 to 12. That’s from a population of 1.1 million 14 years and under. 600% sounds much worse than citing the actual number of cases, and that’s why they used it. It’s more inflammatory and sensational for someone trying to build a case against use of cannabis.
Driving while under the influence of cannabis is a valid concern that you raise, as it is for alcohol and other drugs. Right now police can use a field sobriety test, whereby the officer tests the driver's balance, coordination, and cognitive abilities. With 70,000 cannabis consumers among us in Sonoma County, are you really suggesting that users stop consuming cannabis legally until someone invents a scientific apparatus to specifically test for cannabis intoxication? No one wants drivers to be intoxicated regardless of the substance. But, the onus is with authorities to invent the tool if they think it’s needed to ensure public safety.
In summary, an economic argument led our country into alcohol prohibition and also out of it. But for both cannabis and alcohol, the social injustice that is being righted in legalization transcends economics.
Nine out of ten people behave moderately, whether obeying traffic laws, consuming alcohol and cannabis, or refraining from theft. Our courts and jails are packed with the outliers. Unfortunately, all cannabis users and traders have been unfairly categorized as criminal. There are over 70,000 cannabis consumers and workers in Sonoma County. A small percent of them will abuse cannabis and they will be dealt with.
The tax benefits from economic activity are real, but not the primary reason we should legalize cannabis and regulate it. It’s simply the right thing to do for our fellow citizens who have been deprived their liberties to consume this medically beneficial and recreational substance for far too long.
The California Department of Food and Agriculture (CDFA) posted a survey on the MCCP website from June to August 2016 to query the cannabis industry as to the type of license(s) they plan to pursue, and in which county they intend to seek the same license(s).
The results used for the following analysis were made available by CDFA.
Sonoma County cannabis industry folks submitted 791 license responses that breakdown like this:
Cultivation types 1-4 comprise 61% of all license types contrasted with 19% in distribution and transportation and 12% in manufacturing. It’s highly likely that cultivation license prospects are woefully underrepresented based on the number of current grow operations. All other types reflect significant increases from the current base. It’s worth noting that the number of dispensaries (type 10) is projected to increase by around 600%.
Overall, Sonoma County is poised to have a diversified base of cannabis operators across the supply chain spectrum. The array of percentages for each type is almost identical to the state average with the exception of manufacturing, which is 38% higher for Sonoma County. This is a strong indicator for this region in that it is likely to produce a higher economic multiplier, which means more jobs, similar to Sonoma County’s current food and beverage production.
The challenge before our county and city representatives is to ensure adequate policies and regulations to preserve the billions of dollars in activity currently in production in Sonoma County. The least disruptive path is best for a county that wants to be competitive and emerge a leader in the cannabis sector as we are in beverages and food. If handled with care, discipline and collaboration, Sonoma County can add the cannabis industry to our portfolio of successful economic drivers.
Only license Types 1-3B were analyzed on the economic value of production. Economic value metrics were not available for other license types. A brief reporting of the results are shown below.
The projections for cannabis production by license types is based on modeling that uses the license type square footage descriptions to define the size of grow operations. Depending on the type; sun grown, greenhouse or indoor, dry flower weight yields were calculated for each. Current wholesale market prices were applied to those yields. Like most agricultural products, yield and value can vary widely. I used a median point for calculations.
Yuba County, adult population 54,500, situated between Sacramento and Chico
Yuba’s winning index number: 420
Given the type and number of results, the estimated wholesale value of cultivation activity annually for Yuba County is $290,432,166. That’s a per capita (adults) income of $5,329.
Alpine County, adult population 849, situated near Lake Tahoe
Nearly 10% of the population plans to apply for a license. Assuming they are successful in securing a license, and hire employees in addition to themselves, well, let’s say Alpine is a “company” county. At $152 million in estimated production, that is a per capita income of $179,000. Perhaps opening a 24/7 high-end restaurant is a good opportunity.
Santa Clara County, adult population 1,463,483, situated at the bottom tip of the bay area (San Jose) and the bottom of the index heap.
Santa Clara County indicated 109 licenses for growing worth about $296 million. Their estimated consumption per year is $472 million. Sonoma County is happy to grow product for Silicon Valley and we appreciate the awesome technology coming back our way.
These counties indicated cultivation licenses that put them in the Billionaire Club. In total they represent $20.9B, or 60.3% of the state production of $34.6B.
To put this in perspective, “Over a third of the country’s vegetables and two-thirds of the country’s fruits and nuts were produced in California.” This state produces roughly $50 billion per year in total agriculture, with about $37B of it in crop production.
That number is about to double when cannabis production hits the books.
Please note that production numbers for counties such as Humboldt, Mendocino, Trinity and Sonoma are projected woefully under their current levels of production due to lower survey participation of growers relative to their actual high numbers in those counties. It is most likely that the production numbers for the Southern California counties are higher than their current production.
October 8, 2016
Christopher Thornberg gave his usual rousing presentation on the state of the economy, October 7, 2016 at the Hyatt Vineyard Inn in Santa Rosa, in front of a packed house of local (mostly business) folks hankering to hear his predictions of our economic prospects.
Mr. Thornberg is an economist and co-founding partner of Beacon Economics.
For the past decade or so he has graced the stage at this annual EDB event and given his analysis of local economics mixed with commentary on the state of the US and global economics. His website bills his presentation as “Economic Insights—without the hype.”
He is well-liked by Sonomans and appreciated for his outspoken style. He calls it like he sees it in a refreshing schtick of comic phrasing, metaphors laced with unequivocal assertions of speculation said with authority, and a blur of charts and graphs that serve more as cue cards for him than anything the audience can digest.
I think perhaps he wasn’t quite ready for questions about cannabis and it’s impact in Sonoma County. He prepared assiduously for the standard indicators like housing, infrastructure, jobs, manufacturing, etc..
Then, someone popped the question about cannabis and how it might impact Sonoma County given the recent legislation and probable adult use legalization this November.
This would have been a good time to break with his well-honed schtick and just say, you know I don’t really know. I’ll get back to you next year on that.
But, instead, he walked out on a limb. He just doesn’t think cannabis is going to be that big, or that cannabis will have a strong economic impact in Sonoma County. Strangely, he also said that in case anyone hadn’t noticed, weed has been floating around the state for a long time. This last statement doesn’t comport with his theory; so, I have no idea what he meant by it in relation to the other statements.
Further out on the limb, he told the tale of prices per pound plummeting in Colorado after legalization from $9,000 to $1,800. He then went on to say that even in California the price is around $2,800 a pound. Lastly, he added that demand would remain inelastic despite the legal availability of it.
Let’s start with the last bit first. He’s right, cannabis demand isn’t likely to increase much at all post-legalization. Also, by law, a consumer can’t possess more than an ounce; so, there won’t be the legal wine cellar equivalent (but, you can bet that won’t stop connoisseurs from doing it illegally).
I’ve estimated on this site and in public presentations, the crop production value of cannabis in Sonoma County at $3.5 billion. If I use Thornberg’s per pound estimate at $2,800 instead of my estimate at $1,600, then my projections would increase by 75% to $6.12 billion per year for Sonoma County.
I think that Mr. Thornberg, like others who are used to knowing what they’re talking about, spoke out of turn. He’s not alone in Sonoma County, judging by the gasps I hear from people when they see the number, and then go into denial conniptions.
Fair enough, you don’t know because you haven’t studied it. But making statements as if you do know, especially when you speak with authority, is irresponsible. It does a disservice to the people fighting for their place in the legal economy.
I used the lower price per pound estimate because I do believe there will be price volatility and better to be safe and project downward. But it is the job of regulators to do what they can to stabilize agriculture pricing as they do by limiting production.
Sonoma County planners are doing just that based upon their recent recommendations. I’ve estimated that there are about 425 acres of cannabis in production in Sonoma County and it looks like our planned and permitted acreage is heading toward 479 acres. That’s responsible.
Mr. Thornberg, I look forward to your visit next year and hear what you have to say about cannabis then, after you’ve studied the sector. You will no doubt, have a few zingers for us.
Sonoma County’s first pass at an ordinance for cannabis is a good start in many ways. But, dang if they didn’t go and spoil it with this theory of minimum parcel size requirements—the cultivation plot on a given parcel must be 10% or smaller.
Take a looky-see in the table below showing the permitted cultivation size by license type at the maximum square feet. The next column shows the minimum parcel size, and then the next column shows the percentage the grow area is of the total parcel.
1%, really, on a cottage cultivation? That will fit into the pocket of a pair of overalls.
What’s not clear in the county staff report is why the ratio is so small. From what I understand the cottage minimum parcel size is dictated by the 300 foot setback requirement. Even so, that’s cutting it too close. If the parcel was perfectly square, it would measure 295 feet by 295 feet. So, maybe an amendment of the setback requirement has to be considered.
What’s clear is that if current cannabis grow operations had to conform to these ratios, then it would require so much land that it becomes unfeasible even for the rich yield per acre of cannabis.
See the calculation of the requirement carried to the natural conclusion in the next table. The columns to the right say, if all permits were issued for this license type given the minimum required parcel size, then this is how many permits the county would have to issue and how many acres growers would have to have in order to produce the $3.5 billion we currently do.
Do you see where the ‘incentive funnel’ appears?
That’s right, medium indoor sites. 398 of them at 22,000 square feet each; about the size of the Oliver’s Montecito store times 398.
That means it would take 201 acres, or 8.7 million square feet to reach our present production level. Keep in mind that is 7.3 million square feet more than is available if all the available commercial indoor space were allocated for cannabis.
So, here’s a question for the planning commission and staff: what about a 1:4 ratio, or 25%? That’s 1/4 acre grow space on 1 acre parcel, or 1/2 acre on 2 acres, and so on.
The map below shows the land use zones for Sonoma County. The agricultural land zones are identified as RR (rural residential), RRD (resources and rural development), AR (agriculture residential), DA (diversified agriculture), LEA (land extensive agriculture), R1 (low density residential), LIA (land intensive agriculture), PC (planned community), R2 (medium density residential), TP (timberland production).
The land area of Sonoma County is 1,768 square miles, or 1,131,520 acres. Our agricultural lands make up about 586,000 acres, or roughly half the land area. That’s primarily LEA, LIA, DA, AR, RR and TP.
Cannabis cultivation needs about 500 acres or 0.00085% of the total.
If dispersed throughout the county in one acre increments, cannabis cultivation is practically invisible. If one acre is the largest parcel for cultivation and the median is 10,000 square feet, or 1/4 acre, then you can imagine its near invisibility.
SCGA (Sonoma County Growers Alliance) proposes just such a plan for Sonoma County. Allow it on these land zones LEA, LIA, DA, AR, RRD and RR and it will be practically invisible, while being incredibly profitable for the county.
It’s feasible to do in such small tracts because of the economic yield per space occupied. The chart below shows the financial contrast between wine grapes, vegetables and cannabis crop yields.
Keep in mind that those are average yields, and nearly everyone knows someone performing much better or worse than those. With cannabis it also matters whether we’re measuring indoor, greenhouse or sun grown plants. So, the yield range for a 10,000 square foot canopy (almost 1/4 acre) could run from $1.4 to $4 million.
The other variable, of course, is the master skills of the cultivator. And that’s where Sonoma County can really shine, if we support the existing population of master growers. It’s in our interest to preserve their operations as they currently are. Give them the time and assistance to come into compliance. Help them form communities with other master growers who can raise best practice standards.
We know this works in winemaking, high technology, art and music.
Visit SCGA website for more information on various cultivation recommendations.
This blog is a precursor to an online media project launching in the fall of 2016 by Sustaining Technologies, LLC. The scope of coverage is economic development for the cannabis sector in the San Francisco North Bay.
Terry Garrett is the author of the posts unless otherwise indicated. His bio is on LinkedIn.