Santa Barbara County’s tax revenue from cannabis operations took a big jump in the fourth quarter of the 2019-20 fiscal year, totaling more than twice as much as revenues from the fourth quarter last fiscal year, according to a report to be delivered Tuesday to the Board of Supervisors.
In fact, taxes from the just-ended fourth quarter, from April 1 to June 30, 2020, were only 12% less than the total cannabis taxes collected for all four quarters of the 2018-19 fiscal year.
The report attributes the sharp increase in tax revenue, in part and indirectly, to the COVID-19 pandemic. But at the same time, the report says, the pandemic has limited the county’s ability to investigate illegal cannabis operations.
“Since the stay-at-home mandate was imposed, the cannabis industry has experienced a sharp increase in consumer demand at the retail level, which in turn impacts the supply chain, creating an increased demand for product supplied by growers,” says the report, authored by fiscal and policy analysts Reese Ellestad and Steven Yee.
“Additionally, new operators are successfully navigating the county’s and state’s regulatory processes, and are therefore entering the market, thus generating new sales and new tax revenue,” the report says.
The report from the County Executive Office shows fourth quarter taxes totaling $5.5 million were collected from 50 of 118 registered operators, based on their reported gross receipts.
Another 43 of the operators reported their gross receipts were zero, and the remaining 25 did not file reports and could face enforcement action.
The $5.5 million is more than double the $2.3 million in cannabis taxes the county collected in the fourth quarter of the 2018-19 fiscal year, when revenues for all four quarters totaled $6.7 million.
In all, cannabis operators paid $12.2 million in taxes for the 2019-20 fiscal year, or nearly double the previous fiscal year’s total, according to the report.
Santa Barbara County is still listed as having the second-highest number of state licenses at 1,133 and cultivated acres at 297.2 in California, according to a staff presentation.
The unincorporated area around Lompoc leads the county with 434 state cultivation licenses, followed by the Santa Ynez Valley with 421. Santa Maria Valley has 79 state cultivation licenses, and Cuyama Valley has 28.
Remaining state licenses are held in the Santa Barbara, Goleta and Carpinteria areas.
Lompoc also leads the county with the most state-licensed acreage under active cultivation at 104.6, with Santa Ynez Valley in second with 97.1. Santa Maria Valley has 19.7 acres under cultivation, and Cuyama Valley has 6.7.
COVID hits enforcement
While tax revenues were up, restrictions from the COVID-19 response as well as protests related to national events drew away resources and put a damper on enforcement actions, the report says.
Although short-staffed, the enforcement team still conducted six operations in the unincorporated areas of Santa Maria, New Cuyama and Santa Barbara.
“Furthermore, the team also took part in stopping a maritime smuggling operation, where thousands of pounds of cannabis were being smuggled into the county from Mexico, for the purposes of saturating the illicit black market,” the report says.
During the fourth quarter, the enforcement team confiscated 3,100 live plants valued at $775,000 and 5,430 pounds of dried product valued at $4.7 million.
That brought the totals for the fiscal year to 19,885 plants valued at $5 million and 8,492 pounds of dried product valued at $8 million, according to the report.
Enforcement team members also responded to 88 complaints during the fourth quarter, 18 of them generated by odor and alleged expansion of legal nonconforming operations in the North County.
“Enforcement operations are mostly complaint-driven; however, some of the sites have been identified using other sources of information and coordinating with the Sheriff’s Office and Agricultural Commissioner’s Office staff,” the report says.
The report also notes one of the county’s objectives in the coming fiscal year is to phase out 12 existing cannabis cultivation operations that have submitted applications for land use entitlement in established developed rural neighborhoods.
Supervisors approved Land Use and Development Code amendment banning cannabis cultivation in EDRNs in response to residents’ complaints about impacts ranging from odor to traffic.
The amendment became effective Aug. 13, so cultivators who haven’t already obtained a land use permit will not be granted one and will have to cease operations.
Supervisors approved other changes to the ordinances governing cannabis as they continue to address unforeseen and unintended consequences of the initially approved regulations.
Conditional use permits are now required for proposed cultivation operations on more than 51% of a parcel in AG-2 zoning, all cultivation must be a minimum of 50 feet from lot lines, and cannabis processing can only take place in an enclosed building using the best available technology for odor control.