Californians are poised to join the ranks of Colorado, Oregon and Washington in legalizing recreational marijuana usage for adults this November. Polling ahead of the vote signals possible approval for Proposition 64 — hovering around 60 percent in the latest poll conducted by UC Berkeley’s Institute of Governmental Studies.
In the states where recreational marijuana use is legalized, tax revenues are booming: From July 1, 2014, to June 30, 2015, Colorado took in $70 million, according to the Colorado Department of Revenue; Oregon is expected to collect an estimated $43 million this year alone, according to the Office of Legislative Revenue; and in Washington state, the Office of Financial Management expects tax revenue to approach $1 billion over the next four years.
In Ventura County, the economics of cannabis is just barely a blip on the radar, as most city legislators, as well as county politicians, are only just now beginning to consider the concept. Farmers, on the other hand, have begun to mull the idea to rescue crops facing a steady increase in production cost.
At a panel discussion on the future of Ventura County farming on Wednesday, Oct. 5, most of the discussion circled around water. One particular panelist, however, brought up a novel idea: Why not cannabis, a crop that requires much less water than traditional crops?
“No matter what side of these policies you want to be on, there’s a law that’s going to pass come November, and farmers are looking for other options,” local longtime farmer Phil McGrath told the crowd of over 100.
McGrath, fourth-generation farmer of McGrath Family Farms, grows a plethora of what he calls “luxury” crops, including strawberries and lemons, on his 300-acre ranch in Camarillo. Luxury crops, he says, require “more input, more labor, more water [and] more pesticides.” Having studied the benefits of growing cannabis, McGrath asks, of cultivating the crop in Ventura County: “Gee, how bad would that be?”
“This is an opportunity to give farmers another option and nobody wants to talk about it, or they’re not talking about it, or they’re worried about their political position.” — Phil McGrath, fourth-generation farmer of McGrath Family Farms
He’s also been following the news out of Colorado and says that, from what he can tell, business is booming.
“I only know what I read, and what I read is that there are a lot of rural communities that have had an incredible economic comeback because of the cultivation,” said McGrath.
In Colorado, where the drug is heavily regulated, the industry has climbed to a net worth of over $1 billion. The industry has had a similar boom in Washington and Oregon. In California, small pockets of the state have seen a similar boom, particularly in Mendocino and Sonoma Counties.
The so-called Emerald Triangle consists of Mendocino, Humboldt and Trinity Counties. Since California’s Prop 215 passed in 1996, allowing the use of medical cannabis, the industry has grown to a “staggering percentage” of the local economy — all the while being what Terry Garrett, co-managing member of Sonoma County GO LOCAL and board member of the Sonoma County Economic Development Board, calls “invisible.”
“From a land standpoint, it’s invisible. From an economic stand point, it’s not on the books. It’s not regulated or taxed. It’s only through its indirect presence do we feel it, but those are very important and real,” said Garrett.
In Sonoma, where Garrett has been actively advocating for county and city governments to adopt regulations to ease licensing for potential growers, and to help growers transition from indoor to outdoor crops, he says the cannabis industry produces an estimated $3.5 billion per year, almost all of which is exported. The wine industry, on the other hand, he says, makes up a large portion of the economy and is primarily what Sonoma is known for; but he adds that growing wine is significantly more costly and consumes more land and resources than cannabis.
“One-20th of 1 percent of the land is [used to grow] cannabis,” said Garrett. “Because so much of it is on a quarter-acre or less, it’s practically invisible, and a lot of that is indoor. It’s not like wine grapes, which are on 60,000 acres.”
Garrett adds that much of Sonoma’s cannabis is grown indoors, in urban areas, and that the city and county could dissuade that by licensing legal outdoor operations, away from private residences.
Just over half of Sonoma County is agricultural land, around 550,000 acres. Ventura County, by comparison, has around 316,000 acres of farmland, which includes grazing pastures, according to the California Department of Conservation’s Farmland Mapping Program and the Ventura County Agricultural Commissioner.
Ventura County’s most acre-consuming crop is avocados, which are grown on about 20,000 acres, followed by lemons (about 15,000 acres) and strawberries (12,000 acres), according to the Ventura County Farm Bureau. The value of that land ranges from $50,000 to $70,000 per acre, according to the 2015 State of the Region Report from the Ventura County Civic Alliance.
Further, in the midst of a drought that affects the entirety of the state, cannabis crops account for much less water usage than do more traditional crops. McGrath offered insight on water usage, explaining that while cannabis requires half an acre-foot of water, strawberries require two and a half to three acre-feet by comparison.
“It takes so little water, so what are we waiting for?” asked McGrath.
According to Garrett’s numbers, which he says he derived based on indoor and outdoor yields, interviews with growers, and contrasted with data collected from the RAND Corporation, the cash generated from growing cannabis could potentially be “two orders of magnitude greater than wine grapes” for a total of $8.2 million per acre, compared to $24,000 for vegetables, $8,500 for wine grapes per acre.
This is in Sonoma, of course, where marijuana cultivation is deeply rooted, having begun in the 1960s. In Ventura County, however, no such growing culture exists, and cities have been slow on the uptake.
“The challenge is that if your folks aren’t doing anything right now, then you’re really missing the boat on this,” said Garrett about Ventura County. “And you’re going to miss the opportunity to regulate it in a way that reflects your community.”
McGrath says that he would like to know more about what each city and the county is planning to do in regard to licensing and legalization of cultivation, adding that details are hard to come by.
“We’re in a drought; we’ve got [agricultural] organizations that are going bankrupt and under,” said McGrath. “This is an opportunity to give farmers another option and nobody wants to talk about it, or they’re not talking about it, or they’re worried about their political position.”
As with cannabis cultivation laws in Colorado, should California voters legalize the cultivation of recreational marijuana, each individual city will have the power to decide in the end whether or not to license growing operations, dispensaries and delivery services within its jurisdiction.
After legalization was passed by Colorado voters at the state level in 2014, nearly three quarters of the state’s cities rejected legal growing operations, 165 cities in total, with 16 municipalities enacting moratoriums on recreational marijuana. Much of the state’s $996 million 2015 sales were the result of growing and of sale operations near large urban populations such as Denver and Boulder, and spread out to very rural communities; 53 cities permitting recreational marijuana sales, with 27 of those cities levying a special tax, this according to the Colorado Municipal League, as reported in the Denver Post.
Among Ventura County’s 10 cities, only Fillmore has any proactive involvement in cannabis cultivation, where in November, alongside Proposition 64, voters will be asked whether or not to adopt a tax on the sale and cultivation of marijuana, even though growing it within the city is still illegal.
Should the Fillmore City Council legalize the growth and sale of marijuana at a future date, and should the tax pass voter approval, recreational marijuana could be taxed at a 15 percent rate, while growing operations could be taxed up to $30 per square foot for the first 3,000 square feet, $15 a foot after that.
Most other cities in the county are either mulling the concept (unenthusiastically) or haven’t discussed it. But much of the county’s farmland is located in unincorporated areas, subject to decisions by the Ventura County Board of Supervisors.
According to Matt Carroll, assistant county chief executive officer, the board is taking a “wait and see” approach to the upcoming propositions. Most of the county’s focus has been on studying the cultivation of medical marijuana, but the board has studied Proposition 64, says Carroll.
Carroll says that he isn’t sure if tax revenues from sales and growing operations would benefit local municipalities as much as they do elsewhere.
“If you look at the proposition, much of the monies are already designated to go to specific areas,” said Carroll. “There’s some question as to what would even be left over for local governments.”
Proposition 64 allocates money collected from the sale of recreational marijuana as follows: $2 million per year to the UC San Diego Center for Medical Cannabis Research to study medical marijuana; $10 million per year for 11 years for public California universities to research the impact of the proposition; $3 million per year for five years to develop devices for the California Highway Patrol to detect impaired drivers; and $10 million per year, increasing to $50 million by 2022, for local and nonprofit organizations that offer job placement, mental health treatment and rehab services.
At the state level, Prop 64 would impose a 15 percent tax on retail sales of marijuana, and state cultivation taxes on marijuana of $9.25 per ounce of flowers and $2.75 per ounce of leaves. The proposition does, however, allow local taxation on top of state taxation.
The California state legislative analyst predicts that state and local tax revenue “could eventually range from the high hundreds of millions of dollars to over $1 billion annually,” which, if true, would make the allocated funds seem trivial.
Ventura County Farm Bureau Chief Executive Officer John Krist says that the Bureau has not studied the potential impact, economic or otherwise, that cultivating marijuana in the county would have, but said that he was unsure whether local farmers would want to grow the crop even if it were legal to do so.
Aside from safety concerns — and Krist says that crop theft, already a big issue for local farmers, would have the potential to increase should outdoor cultivation be allowed — Krist says that farmers would face their biggest hurdle in financing their operations.
“One of the major challenges anybody is going to face trying to commercialize that particular crop is, where do you get your financing from?” said Krist. “If you don’t have access to the banking industry, to lenders, it’s going to pose an interesting challenge for anybody that wants to develop this.”
But, Krist added, “If this is successful and we have growers who want to explore this opportunity, the cities and the county should not make it unnecessarily difficult for them to do so.”
According to the California Department of Agriculture and Farming, Ventura County has 417 business license requests for marijuana cultivation thus far this year, ranking the county in the top 20 of 58 counties in the state for number of requests. The most common requests are for indoor and outdoor cultivation on for small grows.
In Sonoma, Terry Garrett says that regardless of the reluctant banking system, the money is flowing through the economy and, in turn, funding growing operations.
“I know businesses that aren’t in the cannabis business, but they sell products to the cannabis industry and they’re depositing that money. It’s not directly from the cannabis industry, but yes,it is, because they’re spending their cash,” said Garrett. He points to the states in which recreational marijuana has been legalized, adding that the banking system is “coming around.”
In the states in which marijuana growth and usage is legalized, national brands like Bank of America or Wells Fargo are still not touching growers’ or sellers’ accounts. State-chartered credit unions such as Salal, Maps and the like are, however. In a 2015 report from Marijuana Business Daily, the outlet surveyed 400 “cannabis professionals” on access to banking services. Of the respondents, 40 percent of cannabis dispensary operators had physical bank accounts for their business, while 30 percent of cannabis growers had the same.
Garrett says that these institutions, and the federal government, will eventually change.
“You can’t take a multibillion-dollar industry and not come up with a way to finance it; it’s going to happen.”
Phil McGrath may have been the first modern Ventura County farmer in recent memory to raise the question of cultivating cannabis, but the McGrath family has a history with the crop. McGrath says that he remembers stories his dad used to tell him.
“My dad use to talk about growing hemp and the high quality of rope and other uses it had,” said McGrath. “That was before it was banned in the ’40s.”
Now, he says that perhaps cannabis could help struggling farmers.
“Farming is transitioning in a big way here. Crop programs are changing. Water is forcing us to become sustainable, which is a good thing,” said McGrath. “Any extra options farmers can get helps.”