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FPPC: Bushnell Right to Recuse Herself from Cannabis Tax Vote 

click to enlarge Michelle Bushnell

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Michelle Bushnell

Humboldt County Second District Supervisor Michelle Bushnell was correct to recuse herself from discussing and voting on local cannabis tax relief earlier this year, the California Fair Political Practices Commission has advised, finding she had an economic interest in the issue.

The FPPC informed Bushnell of its decision in a recent letter, which was sent in response to her request for "advice" and, as such, is not a legally binding opinion. But the FPPC was unequivocal that Bushnell's holding state and county permits to cultivate 1 acre of cannabis on a property she owns in southeastern Humboldt County legally prohibits her from voting on changes to local cultivation taxes, at least as they pertain to outdoor farms. The fact that Bushnell has not begun cultivating the property is irrelevant, the FPPC wrote, as changes to the tax "would have a reasonably foreseeable, material financial impact on [her] real property interest."

A possible exception — which applies when an elected official's financial interest in the issue is "indistinguishable from the effect on the public generally" — does not apply, the FPPC found, as Bushnell's permitted cultivation area is roughly four-times larger than the average permitted cultivation site of one-quarter of an acre. As such, a decision financially impacting the property would constitute a "unique effect," the FPPC found.

The issue of Bushnell's potential conflict of interest burst into public view as the board was set to hold a Feb. 1 public hearing to consider reducing or repealing Measure S, a voter approved annual tax of $3 per square foot of indoor cultivation area, $2 per square foot of mixed light cultivation and $1 per square foot of outdoor cultivation. Spurred by the state's crashing wholesale cannabis market and having long complained of being overtaxed and over-regulated, local farmers had been making a concerted effort for weeks to get the Humboldt County Board of Supervisors to take up the issue.

A lot of that effort — in the form of calls and emails — was reportedly directed at Bushnell, whose district is home to the majority of Humboldt County's licensed farms and who sat on the board's ad-hoc cannabis subcommittee with Fifth District Supervisor Steve Madrone. The push worked, as the subcommittee asked that the issue be put before the full board at a special hearing.

But when the Feb. 1 meeting opened, Bushnell announced she would have to recuse herself — an announcement that seemed to blindside the dozens of representatives of the cannabis industry who would later address the board that day.

In retrospect, it seems it shouldn't have.

When campaigning for office in 2020, Bushnell was open about being in the process of seeking a cultivation permit and many seemed to relish her election as the county's first "out-of-the-closet cultivator" to serve in perhaps the world's most famous cannabis county. Bushnell also is listed as the property owner for two other permitted grows — a fact she has similarly been open about. But the prospect of Bushnell recusing herself from a vote was not something that had seemingly been discussed publicly, even as Bushnell participated in other votes impacting the industry. Perhaps most notable among those votes was one in October to allow cannabis farmers to make late payments without penalty on the second installment of 2020 Measure S payments.

For her part, Bushnell said the issue first came up during a conversation with her lawyer after Boot Leg Farms LLC, a company owned by she and her husband, received a state cultivation permit Jan. 3. Still unsure if they would cultivate the property given the state of the cannabis market in California, Bushnell realized if she did, she could face a Measure S tax bill of up to $43,560. Bushnell said her lawyer was adamant: "You cannot do this."

The FPPC has now essentially agreed.

But Bushnell's case seems to underscore the complexities at play under California's Political Reform Act of 1974 and associated laws designed to promote transparency and accountability, in part by purging conflicts of interests from politics. It also leaves a murky picture of who will be participating in future cannabis-related votes of the board.

One thing the FPPC's opinion does not address head-on is whether the other two permitted cultivation operations on land Bushnell owns are potentially problematic or exactly how they should be viewed under the law.

Approved in May of 2021, Chronic Creek LLC has a permit for a 22,000-square-foot, mixed-light farm on a property near Connick Creek in the Garberville area. The grow is owned and operated by Bushnell's friend, Tiffany Smith, who both said pays no rent for use of the property under an agreement to help the business get started.

"I said, 'Once you're up and running, I'll rent you the property. And after two or three years, if you're successful, we'll talk about you buying the property,'" Bushnell told the Journal in March.

While Smith told the Journal she has not yet cultivated on the property, it seems Bushnell would have a potential economic interest in the business becoming successful. But that's pretty hypothetical at this point.

Potentially more complicated is — Hum Fire LLC — the farm owned and operated by Bushnell's son, which is fully permitted to cultivate 17,900 feet of outdoor cannabis and has been operational since 2019, according to tax records. Bushnell reported to the FPPC that she charges her son no rent for the property and has no stake in his business. But Hum Fire LLC was affected by that October vote of the board to waive penalties for late tax payments — an option her son availed himself of, according to county tax records.

State regulations are clear that benefits to family members need to be taken seriously, as well.

"A public official has a disqualifying financial interest if the decision will have a reasonably foreseeable material financial impact, distinguishable from the effect on the public generally, directly on the official or the official's immediate family," states regulation 18700.

So would Bushnell's October vote present a "disqualifying financial interest?" It seems complicated. It seems likely it did have a "foreseeable material financial impact" on the farm's operations — that, after all, is exactly why farmers requested the penalties be waved — but quantifying that isn't straight forward.

Based on the FPPC's analysis of Bushnell's case, it seems like the issue would hinge on whether that benefit was "distinguishable" from the public generally. In asking that question regarding Boot Leg Farms in Bushnell's case, the FPPC indicated the "public generally" exception would apply if the benefit was given to at least 25 percent of the population — in this case, 25 percent of local businesses. In Humboldt County, the FPPC found that cannabis business licenses account for approximately 15 percent of all business licenses locally. But commercial cannabis permits do not require a business license, so "there does not appear to be a feasible way to accurately determine what percentage of businesses in the county would be affected."

The FPPC deemed the matter moot when it came to Bushnell's farm because its size alone presented the potential for a "unique benefit" but it's unclear if that would apply to her son, whose permitted cultivation area is less than half that of Bushnell's but still larger than average.

All this creates a murky picture moving forward, as Measure S taxes — which the supervisors voted to reduce by 85 percent for 2022, to be re-evaluated in 2023 — seem destined to come back before the board.

While the FPPC's opinion was unequivocal that Bushnell should not participate in discussions, much less vote, on whether to change cannabis cultivation taxes on outdoor farms, which would impact her business, it left the door open for her to participate in votes that would impact taxes on indoor or mixed-light cultivation. Under such a scenario, the board would meet — with Bushnell recused — to discuss changes to taxes affecting outdoor cultivation. Then, once that matter is fully settled, Bushnell could return for discussion and votes on taxes affecting the other growing methods as long as those discussions do not "result in a reopening of, or otherwise financially affect, the decision from which the official was disqualified."

But, the FPPC cautions, whether a decision facing the board can be segmented as such depends on a lot of case-by-case specifics, saying Bushnell "may wish to seek further advice" if that's a route she and the board wish to pursue.

Bushnell, who told the Journal in March she regretted having to recuse herself from the Measure S votes and hoped the FPPC would clear the way for her to participate moving forward, was not immediately available to comment for this story.

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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Thadeus Greenson

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Thadeus Greenson is the news editor of the North Coast Journal.

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