News & Opinion » Feature

Growing Pains Part 1: Nipped in the Bud

Small farmers had hoped to usher in California's new legal cannabis market, but the state's high taxes and fees and a loophole in its regulatory scheme are allowing Big Weed to take over.



Page 3 of 4

DeAngelo and Harborside officials declined to be interviewed for this report. But in a recent opinion piece in Leafly, an online cannabis magazine, DeAngelo argued that small cultivators endanger the effectiveness of the new adult-use market because he said they can't efficiently deliver affordable product. He also wrote that the claim that small cultivators need to be protected from large corporate companies is wrong.

"Here's the thing: Propping up California's small-scale cannabis farmers with regulations that forbid efficient-scale cultivation hurts consumers by limiting choice and competition," DeAngelo wrote. "It inflates retail prices and ultimately threatens the viability of the entire regulated cannabis system."

So far, California's regulated cannabis system has been increasingly dominated by Big Weed. For example, a Canadian corporation, Sunniva Medical Inc., recently received local approval to build a 500,000-square-foot cultivation facility in Cathedral City, near Palm Springs. The automated production center will cost an estimated $54 million to build, employ 100 to 200 people, and will ultimately produce more than 270,000 pounds of cannabis annually. City officials estimate that Sunniva will generate between $5 million and $10 million in local tax revenue each year.

With the five-year ban on corporations now effectively gone, local government agencies are having a difficult time resisting big cannabis companies, with their attorneys, consultants, and promises of fat tax receipts. "We are excited to be chosen as the location for this world-class cannabis center that utilizes the latest sustainable technology for cultivation," Cathedral City Mayor Stan Henry said breathlessly in an announcement of the mega-weed facility. "The Sunniva Campus will have a tremendous, positive impact on our economic development through job creation and tax revenue for our public safety, roads and bridges, and community parks."

Nevada company Players Network and its subsidiary Green Leaf Farms, LLC have received approval to build a 6.5-acre industrial park in Desert Hot Springs. The site will include manufacturing and a 400,000-square-foot cultivation facility, which is already cultivating cannabis. The two companies also plan to develop an 8-acre "non-cannabis zone," which will include a hotel, sky bar, cannabis college, condos, commercial offices, and convention space.

In a press release, Green Leaf's CEO Mark Bradley boasted about the advantages that the massive facility will have in the California market. "Some of the major expenses associated with growing consist of electricity and water utilities," Bradly said. "This location will be substantially more cost effective for both of these cost drivers, which will provide us with a competitive edge over other California cultivators."

Allen said the accelerated corporate consolidation is resulting in the marketplace being driven by price rather than quality. "The cannabis market has a value and heritage in California, and, like the wine market, products are brought to market from across an amazing spectrum of providers. Price is not everything," Allen said. "But in the commodity market, it's simply a race for who can hit the lowest price, which has a terrible effect on the product quality."

At a Humboldt County Board of Supervisors meeting earlier this year, 30 local cannabis cultivators packed into the chamber to plead for relief. The growers told supervisors that their businesses are being plowed under by excessive fees and taxes and that a longstanding way of life in the county is being destroyed.

One cultivator, Harold English, said he had been operating in the county since 1973, and now his farm is shut down while he waits for county permitting. And worse, he said, large farms are sprouting up all around the county in the meantime.

"I've never been closer to losing everything than right now," English said. "Speaking on behalf of mom-and-pop growers, you're going to push us out, and that will change the character of this county."

Another cultivator, Nicole Keenan, was more direct. "You guys are fricking killing me," she said. "You're killing us and ruining our community."

Another problem for small cannabis businesses has been county bans. Prop. 64 allowed California's 58 counties and 482 municipalities to decide for themselves if they wanted to participate in the cannabis industry. According to the CGA, only 13 counties have approved ordinances that allow commercial cannabis activity. There are six additional counties likely to approve some type of cannabis ordinances, and another 14 counties are studying the issue.

Sierra foothills counties like Calaveras, Placer, and El Dorado, where there is a long history of cannabis cultivation, have enacted bans. After the Calaveras County Board of Supervisors recently approved a cultivation ban by a 3-2 vote, 500 established cannabis businesses that were either legally operating under Proposition 215 and the Medical Marijuana Regulation and Safety Act, or had applied for licenses under Prop. 64, were forced to shut down, return to the black market, or move to another state, according to Allen.

"Some of the growers have banded together to sue the county for the promises they made to growers, some of whom had applied for local permits and paid fees, etc.," he said. "Others, some who have lived in Calaveras County for generations, have taken their families and moved on to other counties or states. It's a catastrophe."

Local requirements in Oakland have also beleaguered cannabis businesses. Oakland's "equity program," which is designed to create opportunities for low-income people of color to get a foothold in the new industry, has actually favored larger businesses over smaller ones, some cannabis activists say.