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Pot Economics 101

Ever since the legalization of med-pot in the fall of 2015 and the voter-approved legalization of so-called recreational pot (“rec-pot”) last November, I’ve used this column and air time on my KPFN radio program talking about the perils of financial planning and economic forecasting if you own a private sector business or work in government here in this county, which is ground zero for the ganja industry.

Since I’m the owner of a newspaper and also manage the Laytonville County Water District, I can speak first-hand to dealing with the problem attempting to figure out just what are the potential financial and economic impacts and consequences of legalized pot.

Forecasting revenue streams for annual budgets and short-term financial planning is difficult right now because the legalization process is in flux and there is no reliable trending on how many growers intend on transitioning into formal compliance with laws, ordinances, and a regulatory framework that is still being written and constructed as we speak.

Here in Mendocino County, local officials have described the legalization process as “like jumping on a moving train” and potentially “leading people down a blind alley.”

Those remarks do not exactly reassure or encourage pot farmers to take that first important step towards compliance with state and local marijuana laws.

In fact, the trend so far is that folks are staying away in droves from taking out the initial application that leads to legal compliance.

At a recent Board of Supervisors meeting, the county Ag Department reported that as of mid-May, only 152 applications had been received from growers. This is just a guess, but let’s say there’s at minimum 9,000 people in this county who grow weed, that would represent about 10 percent of our population.

One-hundred and fifty-two citizens have begun the application process? If my math is correct, that’s only 1.7 percent of the estimated grower sector. That’s not the kind of trend that bodes well for compliance and the resulting taxes and fees that the compliant are being counted on to boost county revenues.

Speaking of taxes, the county’s Executive Office is projecting a total of 2.1 million pot dollars paid by a base of only 600 law-abiding, compliant growers. You’ve got to be kidding. There’s easily 600 growers within a four mile radius of downtown Laytonville.

So what’s going on with the apparent failure so far with people complying with the new legalization laws?

Who knows?

One thing is for sure, growers only have three options that I’m aware of:

1. Comply with the law, pay your taxes and fees, and acquire your permits and licenses.

That doesn’t appear to be an option that many are exercising right now. Most folks I’ve spoken to tell me they don’t plan to make application under the county’s ordinance.

2. Take your chances and sell your product on the black market.

That may be a very viable option that many growers are mulling over at present. In fact, I think that is the majority opinion right now. The major drawback to that course of action is there will definitely be law enforcement repercussions. For example, Mendocino County Sheriff Tom Allman has for some time made his position on the changing marijuana landscape very clear: If you go to the black market — where it’s estimated that 60 to 80 percent of the ganja consumed is from California — expect a visit from the local pot raiders.

As Allman said at a BOS meeting last year, “I don’t want anyone to think the Sheriff’s Office is going to stop eradicating illegal marijuana … You don’t need to be turning into a commercial marijuana operation thinking this is the golden goose egg because it’s not going to work. I’m sorry.”

In the same vein, Undersheriff Randy Johnson warned farmers at the Laytonville Grange: “If you get caught selling to the black market you are done.”

Lori Ajax, chief of California’s new Bureau of Medical Cannabis Regulation headquartered in Sacramento, says the state must aggressively root out black market pot in order for the legitimate industry to thrive. Commenting on Ajax’s order, Mendocino County DA David Eyster said, “This message should set expectations for those who continue to be there or are venturing into the new frontier. Play by the new rules or expect old-fashion criminal litigation.”

So last week’s MCSO raid in Redwood Valley where 300 to 500 pot plants were eradicated should come as no surprise to anyone.

3. Get out of the ganja business and go legit.

I’ve actually had a few people tell me that they’ve run the numbers and they can’t make a living because the market is so heavily regulated by the state and the county.

The major concern for the small growers though is that they will be driven out by the emerging corporate growers, just like the old family farms in the Midwest were wiped out by Corpo-Ag.

So, there you have it. In many ways what we’re seeing at the moment is basic Economics 101. People are going to make decisions based on what’s best for themselves and take their chances. It’ll be interesting watching how all of this plays out.

(Courtesy, the Mendocino County Observer.)

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