Up In Smoke

The the following zen communication was inserted into the “Summary of Changes in the FY2019-2020 Proposed Budget” presented to the Board of Supervisors on Tuesday:

“The Cannabis Business Tax under performed in FY 2017-18 resulting in a 38.5% reduction in projections for FY 2018-19. The FY 2018-19 Cannabis Business Tax actuals of $1,296,125 resulted in the Auditor-Controller increasing the FY 2019-20 projections by 15% totaling $1.5 million.”

Huh? 

The tax “under-performed” so the projection was increased by 15%?

According to Exhibit A the “Cannabis Tax Revenue” (actual) for the last three years was:

2016-17: $79,868;

2017-18: $1,296,125;

2018-19: $1,011,050.

And for the 2019-20 budgeted (estimated): $1,500,000.

(2017-18 was the year most of the initial spurt of applications came in; they have since dropped down to a crawl.)

The peculiar message continues:

“The biggest unknown component of the Cannabis Business Tax collection is the cannabis cultivation minimum tax true-up process currently underway. Due to the October 2017 fires, calendar year 2018 is the first year the County is collecting the cultivation minimum tax. After the Treasurer-Tax Collector processed the 2018 4th Quarter returns, it was determined that 40 cultivators met or exceeded the minimum tax due amount for their respective cultivation permit type; this equates to 4% of all cultivators in the cannabis tax program.”

Yes, you read that right: Only 4% of Mendo’s growers made enough money to pay more than the minimum tax they were required to pay. (Not to mention all the other costs just to apply for a permit.)

CONTINUING: “Where the minimum tax due amount was not met, invoices for the minimum tax were mailed in April totaling $3.5 million with a payment date of May 31, 2019. The collection process is currently underway. In June 2019, the Treasurer-Tax Collector will have updated information on what percentage of the $3.5 million was paid by the due date.”

Apparently, $1.5 million in “minimum” taxes have been paid so far by the County’s failed pot permit program, thus the $1.5 million “projection.” To hear the Supervisors talk, they think the $1.5 million is some kind of one-time windfall for the County with another $1 mil to be extracted from the permitted pot growers by the end of 2019.

In fact, these paltry amounts don’t even cover the cost of the program, and they demonstrate that most permitted (or wannabe-permitted) growers aren’t making any money at all and are probably in some serious debt. The program continues to churn out a few approved permits, but most growers remain in permanent permit limbo with no end in sight. 

Mendo’s new Planning & Building Director, Brent Schultz, told the board Tuesday — three years after the program was instituted — that he’s “digging down” into the permit process to unearth the reasons for the huge permit processing backlog.

The zen-budget note concludes: “The results from the true-up process [of the minimum tax receipts] may [sic] result in updated projections for the Cannabis Business Tax in the 1st or 2nd Quarter of FY 2019-20.”

This “true-up” is the estimated $1 mil in additional minimum tax receipts expected by December.

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WHEN the voters approved Measure AI, Mendo’s Cannabis Business Tax Measure, back in 2016, it was promoted by the Supes as the better alternative to the pot growers’ own measure, and approved by 63% to 37%, primarily because it promised bountiful new revenues for roads, emergency services, mental health, and code enforcement. 

THE BALLOT summary of the measure asked: “Shall Chapter 6.32 be added to the Mendocino County Code, placing a business tax on cannabis cultivation and dispensaries (not to exceed 10% of gross receipts) and cannabis distribution, delivery, manufacturing, nurseries, testing laboratories and transportation businesses ($2,500.00 per year, to be adjusted in accordance with consumer price index increases) of medical and nonmedical cannabis where legalized by state law, potentially generating millions of dollars annually to help fund county services be approved?”

Turns out the voters were badly misled. 

INSTEAD of “helping to fund county services,” the measure has cost millions, more than it has brought in — and most of what it has brought in is from growers who couldn’t even make enough to cover the minimum tax.

Nice work, Mendo.

Mendo voters also approved the half-cent sales tax increment for mental health facilities and services, Measure B, which was supposed to save money on out-of-county psych placements, among other wonderful benefits. After more than a year and a half the County hasn’t even begun to evaluate alternative facility sites: new psych facilities are still years off at best. 

And now Mendo is talking about putting a sales tax increment measure for roads on the 2020 ballot?

How much more can county taxpayers — not to mention pot growers — be soaked for before voters realize that these revenues are going into a black hole presided over by bureaucratic incompetents?