Kicking the Can Down the Road

Almost two years ago now, in March of 2017, in the early days of the current pot permit program when it was obvious even then that the County was spending more money on the pot permit program than was coming in, we asked CEO Angelo and her then-deputy CEO Alan Flora for a run-down of the pot permit budgeting and reporting process.

Mr. Flora, speaking for the County, replied: “Currently the cannabis program is budgeted in the Agricultural Commissioner's budget (Budget Unit 2710). The program is budgeted separately from the traditional responsibilities of the Ag. Commissioner’s Office (internally), but it is not reflected separately in the County Budget. The FY 2017-18 Budget will include a separate budget unit for the cannabis program so the finances specific to that program are more externally transparent. The Board has not provided specific direction on reporting applications and/or costs, however we would envision the Ag. Commissioner reporting on the program during quarterly budget reports.”

FLORA CONTINUED, “The Agricultural Commissioner's Office has estimated that with 350 applicants the annual program cost would be $745,832. The Board adopted fees in January that would cover these costs. Of course this is somewhat of a moving target and adjustments will need to be made if the number of applicants fluctuates significantly from that estimate. For example, if the County receives 500 applications, the fee structure should still be valid as far as the amount of time required to process a single application, but the County may need to hire additional staff to handle the increased workload.”

Of course, what Mr. Flora (and the rest of the County admin apparatus) “envisioned” never came close to happening. Initial permit applications were more than double what they expected and the “fee structure” came nowhere near covering the County’s fast-growing pot permit staff costs.

ON JUNE 2, 2017, we quoted from the Final 2017-18 County Budget: “…The Board has also directed increased enforcement efforts to be managed through the Code Enforcement Program in Planning and Building Services. Code Enforcement positions are not funded by permit fees and therefore discretionary dollars from the cannabis tax are used to cover the increased costs of this program, including the cost of a full-time Deputy County Counsel and a 0.5 FTE Legal Secretary in the County Counsel’s Office to support the Code Enforcement Program. Similarly a new position in Public Health and a contract for public outreach regarding cannabis education [sic] are funded from cannabis tax dollars…”

IN THE 2017/18 BUDGET, CEO Angelo insisted that the County will “Utilize a conservative approach to budgeting anticipated cannabis dollars, recognizing we are budgeting a new and unpredictable revenue stream.”

TO CEO ANGELO, “conservative” apparently meant a lot of pot permit hiring with no idea how it would be paid for. At that time the County had assigned to the pot permit program: two code enforcement officers, 1.5 lawyers, a hearing officer, 0.5 of a Human Resources Tech, and two public health staffers (one a nurse). Plus six Planning & Building staffers, three more public health staffers, a legal secretary, another human resources staffer, and three “Ag/Measurement Standards Specialists.” Or 14 full time pot program staffers plus six in "code enforcement." This staffing alone (not counting all their new trucks and facilities and office equipment and software) probably represents another $2 or $3 million in gross expenditures. There have been additional, unreported, hires since then (not to mention the revolving door of managers and coordinators). And none of these hires have come before the Supervisors for review or approval.

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At the Tuesday, February 5, 2019 Board meeting, newly hired County pot permit program manager Sean O'Donnell suggested that the supervisors receive less frequent pot permit status reports. Supervisor Williams thought that every two months would be enough since not much seems to change. Supervisor John McCowen thought it needed to be monthly to "make certain it's on everyone's radar,” adding, "Hopefully we will soon start to see some movement. That's the hope."

Supervisor McCowen has been “hoping” for all kinds of reports on all kinds of things for years without success. It’s not likely that more “hope” will produce any more results than the nothing he’s received.

This hoping provoked nervous laughter from Supervisor Carre Brown who seemed to realize that “hope” has not gotten Supervisor McCowen anywhere. Supervisor Dan Gjerde said he preferred every two months but, "If we did it every month we should try to keep it limited to a shorter period. It seems like every time cannabis shows up it becomes a two- or three- hour discussion due to public comment." Supervisor John Haschak, catching on fast to Mendo management, added, "I think we are having too many of these updates which are not updating us too much." After more non-specific discussion the board finally decided to receive their pot permit reports on monthly basis for now.

Supervisor Williams asked, “If an applicant does everything right and turns everything in, how long will it be before they get the state permit? Mr. Schafer (nodding to the audience) applied last July.”

Here we go!

Chevon Holmes, cannabis program coordinator: “It depends. Turning everything in may just be you starting your process. For example, certain cultivation sites also require an administrative permit. Sometimes the processing time for the administrative permit is long. So I couldn't tell you how long it will take unless I know every single thing about the location.” (And guess how long that takes?)

Williams: “But assuming the applicant has done everything right and works through your process at our level, is it true there is a hold up getting the state permit because they can't process them quick enough? I'm hearing mixed messages. We hear from cultivators that they are doing everything right but they can't get the permit and they're going out of business. Then we hear from staff that we are missing application details at the local level. What's the truth?”

This precipitated more bureaucratic obfuscation from Deputy CEO Sarah Dukett, backed up by pot permit program guru Supervisor John McCowen and CEO Angelo, all of whom minimized Mendocino County's role in the process and tried to put as much blame as possible on the applicants and the state. Ms. Dukett concluded by saying, "It's going to be a couple of rocky months."

Williams: “How many permits has the state issued for cultivators in Mendocino County? Not provisional, but full permits?”

McCowen: “Four.”

Williams: “So we do have a problem. Our cultivators can't go forward. They can't get extensions. What do they do?”

More bureaucratic explanations about the problem being outside of Mendocino County’s control.

Williams wanted to put more emphasis on what the county can do about the problem.

McCowen then pointed out that the number “four” is statewide, “out of nearly 4000 applicants,” McCowen said.

Ms. Dukett said that they would know more in the next few weeks about "how much more we need to turn up the heat," adding, "We are getting really close and we're working really hard with them. In a couple of weeks we'll get a better idea of what are the other things we can do to more effectively put pressure on things and see if we can get some other items that are still in the process of being figured out figured out."

Notice how they always use soft, forgettable deadlines like “a couple of weeks,” not specific dates. And nobody asks for any specific dates. Ever.

Williams asked about an agenda item he had proposed to review the county’s policy on minimum cannabis taxes. "I see it as punitive. It's almost like charging sales tax to a store on what they could have sold rather than what they did sell. In the process I discovered, sitting with our Tax Collector-Treasurer, that we are talking about approximately $3.3 million. That number shocked me! There are 1002 permits that are taxable that are in the process. I'm told that 98% of them are subject to the minimum tax. That means only 2% of the cultivators working through the licensing process are generating enough revenue to be taxed. That is a disaster for us. I think we should hold off on the minimum tax. We don't have true cost recovery on the fees. I think we are making it up on the other side as a tax. It's not ideal. Asking staff to do one thing and then coming back a month later and telling them to scrap that and do this other — if we keep that process going we are not going to get anywhere. We are burning time on the context switching. So living with one bad idea can be better than living with another bad idea. I would like us to make a conscious decision how much we would like to subsidize this process. I think we have to in order to keep the cultivators moving forward. But right now we don't know what the program costs. We have staff in different departments but we haven't added it up. We don't know how much of a drain this is.”

Supervisor McCowen went into another windy speech about what he “hoped” would happen, including that he “hoped” they would have "comprehensive information" by March 26, almost two months off, well after the end of the “mid-year,” at the so-called "midyear budget review." McCowen “hoped” it would be "from the inception of the cannabis program. What have we outlaid? What have we taken in? I think we don't have a clear picture of exactly where we stand in terms of expense to the County and revenue received." … " I think we have to look at this when we have some real information in front of us because right now we don't really know where we are with the program."

That’s been true for two years and yet nobody’s even asked about it until Williams brought it up.

After some more bureaucratic talk, Ms. Dukett concluded, "These things will have to be looked at a couple of times in the next year to see how much change happens in the ordinances."

The next year?!

Williams still wasn't satisfied. "I think we need to get more involved at a state level. Some of that comes from collecting the data. Not only are we putting cultivators out of business in this county but we are using millions of dollars of public money to do it at a local level. If that's the case let’s rush to get that data documented and get involved at a county level with our state representatives to change the program. I don't see it working. We are kind of kicking it down the road every two weeks. I don't hear from the industry that it is allowing them to thrive. I hear they are going out of business."

Supervisor Carre Brown sees her job as having two basic functions: going to meetings and keeping the Eel River diversion flowing. So she didn't want to hear any negativity from Supervisor Williams. Oh no. Everyone concerned held lots of workshops and went to lots of meetings and the CEO made a speech or two and they’ve written letters and held working groups and talked to state legislators… "I think we've really really gone out of our way,” said Brown. “I don't want you to think that we haven't,” punctuating her remarks with a pat-down wave towards the upstart Supervisor Williams.

Supervisor McCowen then repeated his speech about Mendocino County being a very small part of the problem. McCowen then said that he just didn't trust pot growers and their outlaw histories and doesn’t think they should get any tax breaks. "We cannot ignore the history of the industry that is very proficient at operating outside of regulated channels,” said McCowen. “We do have people who are in our permit system who both sell product on the white market or on the black market depending on what the opportunity is. That's just reality. And the main complaint I hear from the ones who want the minimum tax reduced is not that they are not making any money. They gave their product to somebody who hasn't paid them for it. So that's not a problem the county created. They are dealing with people who are not paying them for what they produced. That's not the County’s problem."

But none of this attempt to blather-over Williams’ pointed observations addressed the point. Williams was simply saying that there’s a serious problem and they need to get the program and budget data sooner than March 26 (which probably won't be anything near what they need, if at all). The disingenuous comments from the other supervisors about how it's not really Mendo’s problem and they can wait until March 26 for more information basically makes Williams point: the permit program has been in existence for two years now and they still don't know how much it costs, how much they're making, whether they are coming close to their projections, how many people are doing what for how much money, etc.

We hope Williams persists in trying to drag some numbers from the county’s number-phobic, report-phobic, date-phobic supervisors and staff. We are not optimistic. Over the years CEO Angelo and her staff have proven to be very adept at "kicking the can down the road" — with the tacit approval of the Supervisors.

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COUNTY CEO CARMEL ANGELO, Feb 5, 2019 CEO Report: “With the first half of the 2018-19 Fiscal Year (FY) behind us, the Budget Team is now devoting significant time and resources to the preparation of the County’s Mid-Year Budget Report to the Board of Supervisors. The Mid-Year report is scheduled to be presented to the Board at their March 26, 2019 meeting.”

When CEO Angelo pointed this out in her CEO Report on Tuesday not one Supervisor asked why the “mid-year” (the one that ended on December 31) budget report won’t be ready until March 26.

WHICH BRING US TO Supervisor John Haschak’s lone dissenting vote on the big promotion/pay raise for Assistant DA Dale Trigg. Haschak noted that the promotion/raise worked out to be about 7% and he wasn’t comfortable approving any official raises until the line workers got raises.

IT’S NOW even more obvious that CEO Angelo is hiding bad budget news to allow time for top officials to get raises without budget questions. Then, months from now when line worker raises come up, CEO Angelo will present the bad news (sales tax revenues down, pot program in deficit, assessments down due to reduced property sales/values and the 2017 Redwood Complex fire destruction) and it will then, and only then after the top officials are covered, that the County will discover that they probably can’t afford what they’ve been telling employees they would probably get.

REMEMBER: Humboldt County reported its sales tax revenues for the first quarter just two weeks after the quarter ended. Mendo Auditor Lloyd Weer has been telling the Measure B Committee every month down to the penny how much sales tax has been accrued for Measure B. But despite the many obvious red-ink generators, Mendo continues to hand out raises to top officials without asking where the money will come from.

THE ONLY compensating factor for all this is the County’s “vacancy rate” where budgeted-funded positions are left unfilled indefinitely. Clearly, there is a vacancy factor, and it might offset the red-ink somewhat, but again, nobody asks what it’s running or when it will be calculated.

NEVERTHELESS, ON TUESDAY, not one Supervisor, including newly seated Supes Ted Williams and John Haschak, expressed any concern about how long the budget update is taking.

BUT BOTH HASCHAK, WILLIAMS AND GJERDE deserve high marks for (1) Haschak’s bold and lonely challenge to DA Eyster's successful pitch for big pay for his assistant, Mr. Trigg, and (2) Williams for his important clarification of Measure B priorities in that, as Sheriff Allman also clarified at Tuesday’s meeting, the residential psychiatric unit (Puff) should be the first Measure B spending priority over the less difficult crisis stabilization and crisis residential capacity which faces substantially less design and construction hurdles than the Puff/PHF. After a painful from-the-public presentation by a distraught woman whose horses have been sequestered at huge county expense because of her inability to care for them, Gjerde wanted to know if the county was still paying for the small herd's maintenance. The answer from CEO Angelo was no.