Marijuana

Tuesday, July 5, 2022

California Cuts Cannabis Taxes to Heal Ailing Industry

Posted By on Tue, Jul 5, 2022 at 9:46 AM

Local cannabis farmers say plummeting wholesale prices have left many on the brink of insolvency, prompting them to push for tax relief. - SUBMITTED
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  • Local cannabis farmers say plummeting wholesale prices have left many on the brink of insolvency, prompting them to push for tax relief.
California is significantly overhauling its cannabis tax structure, including entirely eliminating a tax on growers, in an effort to boost a struggling legal industry begging for relief.

The changes, which were adopted last week as part of a broader state budget agreement, will also create tax credits for some cannabis businesses, expand labor rights within the industry and switch collection of a state excise tax from distributors to retailers. That tax will pause at 15 percent for three years, after which regulators could raise the rate to recoup lost revenue from discontinuing the cultivation tax.

Prominent cannabis industry groups praised the plan for its potential to lower costs and help make legal sales more competitive with an illicit market that remains robust six years after California voters legalized recreational marijuana. Yet even as the measure won overwhelming approval in the Legislature, it was met with vocal discontent from retailers who say they will not benefit and several lawmakers who complained that it did not do enough to address ongoing racial disparities in the industry.

While efforts to secure further assistance from the state may continue, they seem unlikely to gain favor any time soon with Gov. Gavin Newsom, who signed the tax revision on Thursday.

“I’m incredibly proud of this bill. It accomplishes an incredible amount of things for the betterment of all Californians,” Nicole Elliott, director of the Department of Cannabis Control and Newsom’s top cannabis adviser, told CalMatters. “So I think we need to take a moment to reflect on the fact that something great got done.”

Eliminating cultivation tax was a priority


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Monday, February 7, 2022

Supes Move Forward with Cannabis Tax Relief

Posted By on Mon, Feb 7, 2022 at 2:35 PM

Local cannabis farmers say plummeting wholesale prices have left many on the brink of insolvency, prompting them to push for tax relief. - SUBMITTED
  • Submitted
  • Local cannabis farmers say plummeting wholesale prices have left many on the brink of insolvency, prompting them to push for tax relief.
The Humboldt County Board of Supervisors is moving forward with providing local cannabis farmers some tax relief after a flooding of the wholesale market sent prices plummeting in recent months.

The board voted 3-1, with Second District Supervisor Michelle Bushnell having recused herself due to a potential financial conflict of interest and Fifth District Supervisor Steve Madrone dissenting, to give farmers until September to make payments on bills due this year, while reducing next year's tax bills by 85 percent. Citing concerns over the tax breaks' impact on the county budget — which County Administrative Officer Elishia Hayes warned could result in a hiring freeze — Madrone had supported a more modest 50-percent reducing in the coming year's taxes.

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Monday, January 31, 2022

Gavin Newsom was the Face of Legal Cannabis in California. Can He Fix Its Problems?

Posted By on Mon, Jan 31, 2022 at 3:47 PM

Cannabis plants at the Pure Beauty growing site in Sacramento on Jan. 26, 2022. - MIGUEL GUTIERREZ JR., CALMATTERS
  • Miguel Gutierrez Jr., CalMatters
  • Cannabis plants at the Pure Beauty growing site in Sacramento on Jan. 26, 2022.
When California voters legalized marijuana for recreational use in November 2016, it was also a victory for Gavin Newsom, who spent months traveling the state as the face of the campaign. At an election night party at a San Francisco nightclub, the then-lieutenant governor celebrated this “point of pride,” telling attendees that California had sent a “message powerfully to the rest of the nation.”

It was an important resume-building moment for Newsom, already deep into his first run for governor, who during decades in office has put himself at the forefront of political change. In a profile in Billboard magazine a few months later, he acknowledged that his legacy and that of Proposition 64, the legalization measure, were now tied together:

“Put it this way: Everything that goes wrong, you’re looking at the poster child.”

Five years later, Newsom is governor, and farmers, dispensary owners and other advocates are calling on him to rescue a legal market they say has been pushed to the brink of collapse by a steep drop in prices — and the inattention of a man who was once its most prominent proponent.

“He championed our message and he rode our coattails all the way to the top,” said Michael “Mikey” Steinmetz, co-founder of Flow Cannabis Co., a manufacturer and distributor. “We feel that he has turned his back in some capacity.”

The cannabis industry’s appeal for help is aggressively aimed at the heap of taxes that put it at a disadvantage with the robust illicit market in California. Steinmetz has proposed a boycott of the state’s cultivation tax unless there is financial relief in the upcoming state budget.

Newsom expressed support for taking unspecified steps to “stabilize the market” while unveiling his budget proposal on Jan. 10, but he seems unlikely to embrace radical changes to the system he put his name on with Prop. 64. No plan has yet materialized, and his office declined to make him available for an interview.

“It is an oversimplification to say that tax reduction will solve all of the industry’s problems,” Nicole Elliott, director of Newsom’s Department of Cannabis Control, told CalMatters. “It’s just a vast oversimplification of the number of variables that impact the health of the legal market and that support or foster illegal activity. It is not tax alone.”

Pro-legalization, but not pro-marijuana

Newsom once stood, cautiously, at the forefront of the legalization movement in California. He declared at the time that he was not “pro-marijuana” — he says he has never tried it — but “vehemently anti-prohibition.”

As lieutenant governor, he formed a blue ribbon commission on marijuana policy, which issued a report in 2015 warning that legalization would be a “process that unfolds over many years requiring sustained attention to implementation.” Prop. 64 followed the next year, pitched by Newsom more as an opportunity for social justice — to erase the damage of a drug war that had disproportionately targeted Blacks and Latinos — than for new tax revenue.

After 57 percent of California voters approved the measure, his focus has shifted to issues including health care, homelessness and early childhood education. In his first three years as governor, Newsom rarely discussed marijuana policy publicly, even before the coronavirus pandemic response consumed his administration.

That silence has disappointed many in the cannabis industry who expected he would continue to lead on the issue.

Cannabis products for sale Bloom Room San Francisco Union Square in San Francisco on Jan. 11 2022. Photo by Martin do Nascimento/CalMatters
Cannabis products for sale at Bloom Room at Union Square in San Francisco on Jan. 11 2022. Photo by Martin do Nascimento, CalMatters

Some steps are viewed positively — consolidating the state’s three separate cannabis licensing programs into a single department and, in what was perhaps an industry-saving move, declaring marijuana dispensaries and delivery services an essential business that could remain open during the pandemic.

But there is widespread frustration with Newsom’s inaction on the problems preventing the licensed system from competing as a viable alternative to the dominant illicit market. Legal sales in California reached $4.4 billion in 2020, according to the industry publication MJBizDaily, while experts estimate that illegal sales could be at least twice as much.

Those problems are not entirely Newsom’s creation.

Long before legalization, the Emerald Triangle of Mendocino, Humboldt and Trinity counties established itself as the base of marijuana cultivation for the entire country, making the transition to a regulated system uniquely challenging in California. Many long-standing farmers have been reluctant to make the jump. And despite a stated intent to give small growers a five-year head start, regulations on acreage limits adopted before Newsom became governor, though not over his opposition, opened the door for investors to link parcels into megafarms and flood the market with their crop.

Prop. 64 requires local governments to opt in, so recreational sales are still blocked in about two-thirds of jurisdictions, including some large cities such as Bakersfield and Anaheim. There are 866 licensed dispensaries in California, along with 374 licensed marijuana delivery businesses. That’s just a fraction of the number per capita in other states where cannabis is legal, including Oregon, Washington, Colorado and even Oklahoma. Growers and distributors say they have fewer shops where to sell their products now than when only medical marijuana was legal and licensing for dispensaries was looser.

In addition, taxes — stacked by state and local authorities for growing, distributing and selling — raise the price of legal marijuana by as much as 50 percent for consumers.

“It is an oversimplification to say that tax reduction will solve all of the industry’s problems.”

Nicole Elliott, director of the California Department of Cannabis Control

Industry advocates argue that the Newsom administration has not done nearly enough to lower costs for licensed businesses, or to expand the legal market.

“He’s responsible for setting the agenda for what’s important in the state,” said Imelda Walavalkar, chief executive officer of Pure Beauty, an “environmentally conscious” marijuana brand that has indoor growing and production facilities in Sacramento. “It doesn’t seem like a super priority for them.”

The state, for instance, has not ramped up pressure or incentives to persuade reluctant communities to permit recreational marijuana sales. Social equity programs started by some cities and counties to diversify the industry with more people of color, formerly incarcerated people and residents of neighborhoods with historically disproportionate marijuana arrest rates are taking years to get off the ground.

Last year, Newsom vetoed the industry’s priority legislation, which would have authorized billboard advertising on California freeways, citing the need to protect children from exposure to marijuana.

Walavalkar said a vicious cycle of competition — with venture capital-backed businesses that can afford to operate at a loss to gain market share and licensed growers who continue to divert some of their crop to the illegal market to subsidize their operations — has driven prices in a race to the bottom.

“There’s just not a big margin left, no matter how you slice it or how slimmed down you are,” she said.

‘End of days’ for small farmers

The situation has reached a breaking point in recent months for growers including Ingrid Tsong, who runs Beija Flor Farms in Mendocino County with her husband, Jonathan Wentzel. Prices have fallen so far that their business is now losing money, and the couple is unsure they can afford to plant a crop this year.

“It is like end of days here. We do not know,” Tsong said. “I can’t find my way through this morass.”

Tsong said she and Wentzel were skeptical of Prop. 64, because they believe it lacked sufficient protections for the well-established industry of small cannabis farmers that has long existed on the margins in California. Still, after it passed, they stepped forward to license their operation.

The combination of high taxes and fees and an acreage cap for their farm, an oversupply of marijuana on the legal market and few places to sell it, has squeezed them from all directions. Tsong said their crop last fall cost about $460 per pound to produce, a third of that from California’s cultivation tax for growers. But wholesale prices have dropped to about $300 per pound in recent weeks, compared to as much as $800 per pound at the same time last year.

Jonathan Wentzel and Ingrid Tsong at their home in Healdsburg on Jan. 27, 2022. Wentzel and Tsong run Beija Flor Farms in Mendocino County. Photo by Paul Collins for CalMatters
Jonathan Wentzel and Ingrid Tsong at their home in Healdsburg on Jan. 27, 2022. Wentzel and Tsong run Beija Flor Farms in Mendocino County. Photo by Paul Collins for CalMatters

The couple has already dipped into savings to stay afloat, Tsong said. Because cannabis is still illegal under federal law, they do not have access to bank loans or agricultural aid programs available to other farmers, leaving them without the capital they need to front the cost of production at the start of a new season.

While Beija Flor Farms, which harvests a piece of property that has been in Wentzel’s family through several generations of growing cannabis, is better positioned to survive than many small operations in the Emerald Triangle, the financial hit of sitting out a year is still difficult for Tsong to fathom. The couple has already pulled from their savings.

A decision looms, as Tsong and Wentzel will need to start preparing to put plants in the ground in May. Their calculation could change if the market turns around or the state takes quick action on relief for the cannabis industry — Tsong is hoping some of the state’s $21 billion discretionary surplus can go to a tax rebate for small farmers — but even a scaled-backed crop feels like a risk.

“It doesn’t seem smart to try again given the brick wall we’re facing,” Tsong said. “If we farm this year, it honestly might just be a labor of love.”

Industry seeks help from Sacramento

Three days after Newsom’s pronouncement about stabilizing the market, dozens of small growers from the Emerald Triangle, social equity license holders and other activists gathered on the steps of the Capitol to demand an end to what they deemed the “war on drugs 2.0.”

Johnny Casali brought a cannabis plant, from a strain named for his mother, from his Humboldt County farm and set it next to the podium as he railed against the overtaxation that he said was destroying the legal market. Dispensary owners, shut out of traditional banking, shared their struggles with frequent break-ins by thieves who know they have cash on hand.

Supporters for equity cannabis tax reform gather for a rally at the California State Capitol on Jan. 13, 2021. Photo by Rahul Lal for CalMatters
Supporters of cannabis tax reform gather for a rally at the state Capitol on Jan. 13, 2021. Photo by Rahul Lal for CalMatters

Attendees lingered after the speeches ended, enjoying a joint in the sun and waiting for a turn to talk to state Sen. Steven Bradford, who spoke at the event in solidarity.

As bill ideas circulate at the Capitol, lawmakers are poised to take up the cannabis industry’s cause this session. Bradford told CalMatters that, besides an overhaul of the tax structure, the Legislature could address prohibitive start-up costs for marijuana businesses, such as extensive environmental reviews or a requirement in many communities that dispensary owners have a storefront rented before they can even apply for a license to open.

“We’re, in essence, enabling the illegal market to continue right now,” the Gardena Democrat said. “That’s who’s winning this battle.”

What the industry really wants is broad tax relief. At the Capitol rally, farmers urged the state to eliminate the cultivation tax, which recently increased to more than $10 per ounce, or switch from a flat rate to a percentage of the price. Social equity license holders asked for a suspension of the 15 percent excise tax, to give their businesses a greater opportunity to establish a foothold.

“You give us this opportunity and then you let us swim with sharks, because you don’t provide any protections.”

Kika Keith, owner of Gorilla Rx Wellness, a dispensary in Los Angeles

Kika Keith, whose dispensary Gorilla Rx Wellness was one of the first licensed through Los Angeles’ social equity program, said campaign promises that Prop. 64 would provide redemption for communities hurt by the drug war proved to be a “Trojan horse.”

She slammed regulators for prioritizing bringing the existing cannabis market, which is predominantly controlled by white-owned businesses, into compliance. Assistance for entrepreneurs from disadvantaged backgrounds, including $55 million in grants from the state for social equity licensing programs, has been slow to reach those it was meant to help, she said.

“You give us this opportunity and then you let us swim with sharks, because you don’t provide any protections,” Keith said. “This is a state of emergency for Black and brown community members who have given up everything to be a part of this industry.”

Tough choices and trade-offs

It’s a complicated political puzzle for Newsom, who said at his budget press conference that he would “look at tax policy.” Any changes need to account for the impact on revenue, he said — an estimated $595 million in the 2022-23 budget to help fund child care slots, environmental cleanup programs and impaired driving prevention efforts.

The governor also said it’s “my goal to get these municipalities to wake up to the opportunities to get rid of the illegal market” and “to provide support and a regulatory framework for the legal market,” but did not offer any details. Tension over local control is a frequent issue at the Capitol, and there may be little appetite to dramatically curtail the rights of cities under Prop. 64.

Elliott, his top cannabis adviser, said the administration might be inclined to pursue changes that make it easier to comply with the legal cannabis system by addressing the “pain points” for operators, such as the fact that they must prepay some of their taxes on products they have not even sold. Newsom’s approach will depend on what proposals emerge from the Legislature, she said, because they will need to work together to reach the two-thirds vote threshold required of any tax measure.

“Everything’s a trade-off,” Elliott said. “It will be challenging to have anything but revenue neutrality because there are stakeholders who care about that revenue.”

Those include law enforcement organizations and unions that represent programs funded by the revenue. Public health groups also worry lowering the cost will encourage more marijuana use.

Keith Humphreys, a professor of ​​psychiatry and behavioral sciences at Stanford University who served on the steering committee of Newsom’s blue ribbon commission, said the legalization framework of Prop. 64 was more corporate-friendly than the panel’s recommendations. He said the state should crack down on the illicit market by stepping up enforcement against unlicensed operators, rather than giving incentives to cannabis businesses.

“That’s more sensible than messing with taxes,” he said.

It’s a sensitive subject in an industry that is still grappling with the legacy and the trauma of the war on drugs. While some licensed growers and dispensary owners do believe the consequences are too low to discourage those operating illegally, others argue that large-scale enforcement would be fruitless against an illicit market that is so pervasive.

Steinmetz, whose Flow Cannabis Co. has gone through multiple rounds of layoffs over the past few years as it has struggled to compete, called it “a game of whack-a-mole.”

Law enforcement is unable to stay on top of illegal marijuana farms, especially on public lands, which steal precious water and raise the risk of devastating wildfires. Unlicensed dispensaries, even when they are shut down, often soon pop up in a new location.

Casali, whose family started growing cannabis in Humboldt County in the mid-1970s, was arrested on illegal cultivation charges in 1992 and served eight years in federal prison. Unlike many of his peers, he opted to apply for a license for his Huckleberry Hill Farms after Prop. 64 because he was tired of a life in the shadows, running from helicopters and special agents.

Now he worries that legalization also means the end for the small farmers like him who built California into a marijuana powerhouse.

“The people who created the system truly do not understand what we went through,” Casali said. “We’re the ones who helped create a multibillion-dollar industry and now you don’t want us.”

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Thursday, December 2, 2021

Ex-Rohnert Park Cop Pleads Guilty to Conspiracy to Commit Extortion

Posted By on Thu, Dec 2, 2021 at 1:32 PM

Sgt. Brendan "Jacy" Tatum walks into the Phillip Burton Federal Building and U.S. Courthouse in San Francisco. - SUKEY LEWIS/KQED
  • Sukey Lewis/KQED
  • Sgt. Brendan "Jacy" Tatum walks into the Phillip Burton Federal Building and U.S. Courthouse in San Francisco.
The former head of the Rohnert Park Public Safety Department’s drug interdiction team pleaded guilty Wednesday to federal charges of conspiracy to commit extortion under "color of law," falsifying records in a federal investigation and tax evasion.

Ex-Sgt. Brendan “Jacy” Tatum and his former partner, Joseph Huffaker, were both indicted by a federal grand jury in September for their role in an unlawful marijuana and asset seizure scheme uncovered by KQED in 2018.

Tatum stood straight-backed in a dark navy suit in the wood-paneled federal courtroom in San Francisco before Judge Maxine Chesney. She methodically went over the three counts of the indictment and then asked Tatum how he pleaded.

"Guilty, your honor," he said.

Tatum declined to publicly comment at Wednesday’s hearing. But about an hour after the court hearing, his lawyer, Stuart Hanlon, emailed KQED about Tatum’s plea.

"My client plead guilty to all charges he is facing because he is in fact guilty," Hanlon said. "He realizes he has made huge mistakes and that there will be serious consequences for him. He is ready to face these consequences. The first step is to admit what he has done."

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Tuesday, July 20, 2021

Thieves Are Stealing California's Scarce Water for Illegal Cannabis Farms

Posted By on Tue, Jul 20, 2021 at 8:06 AM

The vandalized water source where most water thefts occur in Lancaster, on July 2, 2021. The water is pumped into large containers that are sold and bought on the sides of the road. - PABLO UNZUETA FOR CALMATTERS
  • Pablo Unzueta for CalMatters
  • The vandalized water source where most water thefts occur in Lancaster, on July 2, 2021. The water is pumped into large containers that are sold and bought on the sides of the road.

One day last spring, water pressure in pipelines suddenly crashed In the Antelope Valley, setting off alarms. Demand had inexplicably spiked, swelling to three and half times normal. Water mains broke open, and storage tanks were drawn down to dangerous levels.

The emergency was so dire in the water-stressed desert area of Hi Vista, between Los Angeles and Mojave, that county health officials considered ordering residents to boil their tap water before drinking it.

"We said, ‘Holy cow, what’s happening?’” said Anish Saraiya, public works deputy for Los Angeles County Supervisor Kathryn Barger. 

It took a while for officials to figure out where all that water was going: Water thieves — likely working for illicit marijuana operations — had pulled water from remote filling stations and tapped into fire hydrants, improperly shutting off valves and triggering a chain reaction that threatened the water supply of nearly 300 homes.

As drought grips most of California, water thievery across the state has increased to record levels. Bandits in water trucks are backing up to rivers and lakes and pumping free water they sell on a burgeoning black market. Others, under cover of darkness, plug into city hydrants and top up. Thieves also steal water from homes, farms and private wells, and some even created an elaborate system of dams, reservoirs and pipelines during the last drought. Others are MacGyvering break-ins directly into pressurized water mains, a dangerous and destructive approach known as hot-tapping. 

In Mendocino County, the thefts from rivers and streams are compromising already depleted Russian River waterways. In one water district there, thefts from hydrants could compromise a limited water supply for fighting fires, which is why they have put locks on hydrants.


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Tuesday, June 15, 2021

HSU Expanding Curriculum with Polytechnic Push

Posted By on Tue, Jun 15, 2021 at 11:55 AM

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As a way of prioritizing Humboldt State University's push to become polytechnic, the university is expanding its curriculum to include more STEM-related degree programs as soon as fall of 2023.

“This is what a 21st-century education looks like: programs where students build the skills to have meaningful careers and a nuanced understanding of society’s complex issues so they can make the world a better place,” says Jenn Capps, HSU provost and vice president of academic affairs.

According to the release, HSU will formally submit proposals to California State University to add applied fire science and management, cannabis studies, data science, energy systems engineering, engineering and community practice, geospatial information science and technology, marine biology, mechanical engineering and software engineering for the 2023 fall semester. The programs, along with other applied and social sciences slated for 2026 and 2029, must be approved by the CSU's Chancellor's Office, the CSU Board of Trustees and receive accreditation from various organizations.

“These programs are a win for HSU and the greater north state,” says Mary Oling-Sisay, vice provost and dean of undergraduate and graduate studies. “They bring to life what we do and what we’re known for and will augment our current offerings in a very significant way.”

Read the full press release below.

HSU Continues Polytech Push with Plans for Several New Programs

Drawing on its strengths in STEM, environmental and social responsibility, and experiential learning, Humboldt State University has submitted documentation of its intent to launch several new and innovative undergraduate and graduate degree programs as soon as Fall 2022 and Fall 2023.

HSU will formally submit proposals for the following programs to the California State University for consideration: Applied Fire Science & Management, Cannabis Studies, Data Science, Energy Systems Engineering, Engineering & Community Practice, Geospatial Information Science & Technology, Marine Biology, Mechanical Engineering, and Software Engineering for Fall 2023. (See descriptions below.)

“This is what a 21st century education looks like: programs where students build the skills to have meaningful careers and a nuanced understanding of society’s complex issues so they can make the world a better place,” says Jenn Capps, provost and vice president of academic affairs.

The programs are among those prioritized through the collaborative polytechnic planning process on campus. The fast-track timeline is highly dependent on additional state funding that has been proposed by the Governor and is being considered by the Legislature.

These programs, in addition to those in applied and social sciences slated for 2026 and 2029, are pending the necessary approvals by the CSU Chancellor’s Office, CSU Board of Trustees, plus accreditation from various organizations.

The announcement comes as HSU explores becoming the third polytechnic university in the CSU and the only one in Northern California. The new programs align with the University’s vision of becoming a polytechnic that builds on a strong liberal arts foundation and long-standing commitment to sustainability and social justice; and infuses traditional ecological knowledge, renewable energy, and more.

A polytechnic status would have broad implications for the region and state. It would help revitalize the economy of the North Coast (where HSU is the largest employer), provide educational opportunities to students across the state, and help meet California’s workforce needs.

“These programs are a win for HSU and the greater north state,” says Mary Oling-Sisay, vice provost and dean of undergraduate and graduate studies. “They bring to life what we do and what we’re known for and will augment our current offerings in a very significant way.”

New HSU Degree Programs

Applied Fire Science & Management, Bachelor of Science, will develop the practical knowledge and skills to become fire science or management professionals. Created in collaboration with HSU’s respected Forestry & Wildland Resources and Native American Studies programs, the Applied Fire Science & Management major will also include a breadth of perspectives and knowledge systems (e.g., traditional ecological knowledge), with an emphasis on incorporating indigenous practices.

Cannabis Studies, Bachelor of Art, engages a curriculum that centers place with people, planet, and prosperity as related focal areas. These areas encompass environmental, life and physical sciences as well as geography; sociology, anthropology, psychology, history, politics, social work, Native American Studies, child development, kinesiology, and criminology and justice studies; and economics, business, and recreation management.

Data Science, Bachelor of Science, develops the skills to synthesize knowledge and apply contemporary statistics, data analysis, and computational science methods to solve social and environmental problems.

Energy Systems Engineering, Bachelor of Science, incorporates elements commonly included in Civil, Environmental, Mechanical, and Electrical engineering disciplines. It is designed to prepare students for careers in developing, designing, operating, and analyzing clean energy systems.

Geospatial Information Science & Technology, Bachelor of Science, prepares students for careers as Geographic Information System (GIS) analysts and specialists, remote sensing analysts, cartographers, photogrammetrists, and geographers.

Engineering & Community Practice, Master of Science, develops future engineering leaders who will sustain, restore, and protect our natural resources and the environment.

Marine Biology, Bachelor of Science, explores the diversity of marine life, its evolutionary history, the importance to our planet, and how it is impacted by human activities.

Mechanical Engineering, Bachelor of Science, explores a range of integrated engineering systems that include thermal and electromechanical elements.

Software Engineering, Bachelor of Science, applies engineering concepts to software development. It encompasses the development, operation, and maintenance of programs.
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Thursday, May 13, 2021

County Allows Cannabis Growers to Apply for Tax Refunds in Wake of Court Ruling

Posted By on Thu, May 13, 2021 at 4:54 PM

After a an appeals court ruled the Humboldt County Board of Supervisors overstepped when it "impermissibly broadened the scope" of the cannabis tax voters approved in 2016, the county is beginning the process of refunding potentially millions of dollars in tax payments.

In a press release issued today, the county is introducing a process for people who paid cannabis excise taxes under Measure S from 2017 through 2021 to request a refund.

"In order for an application to be considered for a refund, taxpayers need to provide documentation that they did not cultivate cannabis during the year they were assessed a tax or that they cultivated an area that was different from that of their permit," the press release states. "Taxpayers seeking a refund will need to submit an assessment appeal application, along with an additional form that is specific to the refund claim, to the Clerk of the Board's Office. A separate application must be submitted for each year that a refund is sought, within four years from the date the tax was paid."

The county will then review the applications and compare them to "available information, including but not limited to satellite imagery and state tax records," and then either pause a settlement with the applicant or more to an assessment appeal hearing.

For background on the lawsuit challenging the board's changes to Measure S, as well as the tax measure itself, read past Journal coverage here. And find the full press release from the county copied below.


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Thursday, March 18, 2021

Going Big

Cannabis organization opposes Sun Valley's large pot farm

Posted By on Thu, Mar 18, 2021 at 1:00 AM

Humboldt County's largest cannabis trade organization has come out in opposition to a proposal to construct a 23-acre cannabis farm in the Arcata bottoms, largely on the grounds that the project is just too big.

"Historically, [the Humboldt County Growers Alliance] has supported many cannabis projects before the Planning Commission, while remaining neutral on others," reads the alliance's March 15 letter to the commission. "Previously, however, HCGA has not formally opposed any specific cannabis project in Humboldt County. The scale of the proposed project, however, as well as its violation of a number of land use principles that guide other cannabis projects in Humboldt, have led our members to overwhelmingly express their opposition to this project as proposed, and our policy committee to adopt the position in this letter by a vote of 9-0."

The proposal — put forward by a sister company of Sun Valley Floral Farms — would see a 23-acre greenhouse growing operation spanning more than 1 million square feet erected on a 38-acre former mill site between Foster Avenue and 27th Street, near Sun Valley's existing bulb farm. If approved (as the Journal went to press it was slated to go before the Humboldt County Planning Commission for a conditional use permit hearing March 18, with the commission's decision appealable to the board of supervisors) the project would be by far the largest cannabis farm in Humboldt County, and one of the larger legal operations in Northern California.

But the HCGA's letter is only the latest in what is shaping up to fierce opposition to the proposal, as hosts of neighbors, Arcata residents and environmental groups concerned about the project's potential impacts to area traffic, air quality, light pollution and water. Some have also argued that environmental review on the project has been insufficient and should have included a full environmental impact report rather than the less exhaustive mitigated negative declaration — used for projects where it's determined all environmental impacts can be mitigated into insignificance.

The project is being proposed by the Arcata Land Co., LLC. Though technically a stand-alone company, it lists Sun Valley Floral Farms CEO Lane DeVries as its principal and, in an interview with the Lost Coast Outpost, the Sun Valley CEO is said to have lumped the two companies' interests together, saying the move into cannabis was necessitated by Sun Valley's economic struggles. (DeVries did not immediately respond to a Journal message seeking comment for this story.)

The proposal would include 17.2 acres of light-deprivation greenhouses and 5.7 acres that would be operated as mixed light, meaning they use both natural sunlight and grow lights. For the mixed-light greenhouses, the staff report states "strict adherence to night sky standards will be achieved" with light and glare controlled by using "blackout plastic/fabric" to cover the structures and keep light from escaping.

In its letter, HCGA points to the staff report's estimate that the project will not demand any more than 1.9 megawatts of electricity at any time, which would be 1.7 percent of the entire county's average energy demand, according to a report from Schatz Energy Research Center.

Water for the operation would come from a well on the property, which an initial study has shown would supply more than enough to serve the project. The greenhouses would be outfitted with large fans and carbon filters to mitigate smell. If that proves insufficient, they would also use odor neutralizers such as Ecosorb, which bills itself as a "natural industrial odor control" system that uses non-toxic, plant-based products to break down and neutralize odor molecules.

Currently, the property has some greenhouses used to grow flowers, with adjacent fields used to grow both flowers and mixed row crops, according to a county staff report. About 40 full-time equivalent employees currently work the site — a number that would jump to about 115 if the cannabis operation is approved.

In comments to the Lost Coast Outpost, DeVries stressed the project is really about keeping people employed locally, noting that the domestic flower industry was already in a tough spot with international competition and rising labor costs when COVID-19 hit, wiping out 2020's lucrative Easter season, further raising costs and limiting markets.

This project, he said, "would allow our company to continue operations and continue the employment of 450 people. The well-being of them and their families is depending on the approval of this project."

And seemingly in anticipation of the concerns of some within the cannabis industry, DeVries told the Outpost that it's not "necessarily" Sun Valley's intent to be competitive with other local operations and the project "helps Humboldt stay relevant in the California cannabis market."

DeVries is certainly correct that other areas of the state are in the process of permitting large-scale cultivation. Last month, Santa Barbara County rejected an appeal of an 86.8-acre cannabis cultivation project and, closer to home, the Halo Collective announced plans to cultivate two harvests of 60 acres of cannabis per year on a 1,600-acre property in Lake County. (Halo's partner company in the project, Green Matter Holding Inc., has a sister company in Humboldt County — Humboldt Standard — that once boasted the largest legal grow in California on 8.5 acres in Willow Creek.)

In its letter, HCGA makes clear it disagrees with DeVries' take that scaling up is necessary for Humboldt County to stay relevant. First off, the alliance argues that Humboldt County is home to 30 percent of the state's cannabis farms and currently leads California in both cultivation licenses and independent farms by a large margin. And the average size of Humboldt County's farms is currently half an acre, the alliance writes.

"While it is correct that large-scale cultivation is occurring elsewhere around the state, with several 20-plus acre cultivation projects approved on the Central Coast and parts of Northern California, the existence of these industrial scale projects in traditional agricultural regions only increases the importance of preserving Humboldt's reputation for small-scale, craft and independent production," the alliance writes. "While Humboldt will never compete with traditional agricultural regions in terms of size and scale of production, it is well positioned to compete on craft, quality, terroir and a global reputation for high-quality, artisan cannabis.

"... Additionally, the proposed project site in the cold, wet and foggy Arcata bottoms, which is poorly suited to cannabis flower production, provides no conceivable benefit for the reputation or quality of the Humboldt brand, and only threatens to increase misinformation that Humboldt County has become dominated by industrial-size farms post-legalization," the letter continues, adding that the alliances understands it's not the planning commission's job to "vet the quality of cannabis" a project will produce.

It's worth noting the project as proposed is only possible due to the Heavy Industrial zoning of the property, which — in contrast to other zoning designations — leaves the planning commission total discretion to decide when a project is too big. That will leave the commission (and potentially later the board of supervisors) to wrestle with the competing interests of a company trying to save and even create jobs and a neighborhood concerned about impacts, while also charting the best course forward for one of Humboldt County's largest industries.

Thadeus Greenson (he/him) is the Journal's news editor. Reach him at 442-1400, extension 321, or thad@northcoastjournal.com. Follow him on Twitter @thadeusgreenson.

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Friday, September 25, 2020

Ford Sentenced in Cannabis Insurance Embezzlement Case

Posted By on Fri, Sep 25, 2020 at 4:06 PM

Humboldt County Superior Court Judge Christopher Wilson sentenced John Ford to serve 90 days in jail and five years probation after the former insurance broker pleaded guilty to felony embezzlement.

An investigation by the Humboldt County Sheriff's Office, the District Attorney's Office and the California Office of Insurance alleged that Ford contracted with various clients in 2016, including several cannabis businesses looking for insurance policies, but simply pocketed premium payments rather than purchasing policies. He was charged with 13 counts of embezzlement and grand theft.

According to a press release from the DA's office, Ford's sentence includes an order to make restitution payments to all victims.

Read the full press release copied below:

PRESS RELEASE

September 25, 2020

District Attorney Maggie Fleming announced that on September 24, 2020, Judge Christopher Wilson sentenced former insurance broker, John Ray James Ford, to five years of formal probation and 90 days in jail. Mr. Ford pled guilty to violating Penal Code Section 503, felony embezzlement. A client and the client’s attorney first reported misappropriation of funds by Mr. Ford to the Humboldt County Sheriff’s Office (HCSO). The HCSO, Humboldt County District Attorney’s Office, and the California Department of Insurance then collaborated on an investigation. The investigation revealed that in 2016, Mr. Ford had contracted with various clients, including cannabis-related businesses, to broker insurance policies on their behalf. After receiving premium payments from clients, he either did not put coverage in place or established policies that were subsequently cancelled by the insurer for non-payment. Mr. Ford used the payments from clients for his own business and personal expenses. Mr. Ford’s sentence includes an order to make restitution to all victims.  

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Tuesday, September 22, 2020

Fortuna to Fine Commercial Cannabis Growers, T-S reports

Posted By on Tue, Sep 22, 2020 at 6:56 PM

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Fortuna will begin fining commercial cannabis growers in the city $1,000 a day after a unanimous vote Monday by the city council, according to the Times-Standard.

Read the full story here.
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