April 14th 2025 Newsletter - BOS Tax Meeting April 15th

April 14th, 2025

This item is scheduled for 1 p.m. on April 15 with the Workshop following at 1:3O. The analysis below of the proposed Cannabis Business Tax Ordinance was prepared by the Neighborhood Coalition. County Staff is recommending a 25% tax cut.

Letter to Board of Supervisors:

Analysis of the proposed Cannabis Business Tax Ordinance Amendment, BOS April 15th meeting

1.   Survey sample size too small, is without verification and is inconsistent with price reductions reported at the State level:  
   1.   Only 16 of 66 (20%) of growers responded to the survey.  This extremely low response rate
   2.   PS and HDL comment: “It should be assumed that operators’ participation is likely because of the incentive to encourage the County to adjust the cultivation tax rates.”
   3.   HDL Report: “We do not have any data to inform us as to why prices for local growers would have fallen later and by more than average prices statewide.”  “DCC statewide data show a much smaller price reduction has occurred: From 2022 to 2024, statewide average prices fell by a more modest 16%”  Note: This is roughly 8% reduction per year verse the 25% reduction being proposed by PS
   4.   In conclusion: the proposed tax reductions are based on growers self-reporting with no independent verification and are inconsistent with reductions reported state wide.  We believe this is too small of a sample size to base any tax reduction.
2.   Tax methodology does not consider the County costs to support each cultivation type (Outdoor, Indoor, Mixed light):   The following $/sq ft is being proposed:  Outdoor= $.52 cents, Indoor= $5.69, Mixed-Light=$1.88.  These tax rates are based on the relative revenue each cultivation type generates but doesn’t consider the County’s cost to support and manage each type, which is likely significantly different.   Outdoor cultivation has significantly more issues than Indoor cultivation with a) environment impacts (water, odor, noise, traffic, aesthetics, soil, soil conservation) and b) with the health, safety, and welfare of nearby residences impacts.   Indoor is generally located in an industrial zone area served by public infrastructure (power, water, waste), easier to secure, with little or no neighborhood impacts (see exhibit B).  The County’s time and effort to manage an indoor site would be significantly less, hence less costly. The County tax rates should reflect such.
3.   Tax rates are not sufficient to pay for the program:  Attachment D: Cannabis Program Budget, clearly illustrates tax revenues are not covering the program costs.  As stated in the Summary report “Due to declining revenue, the program has had to use fund balance to maintain program operations.”  “To make up the difference between program costs and cannabis business tax revenue, the program has relied on, and will continue to rely on, fund balance to make up the difference in program costs from cannabis business tax revenue received, which, with current assumptions, will sustain the program through FY 26-27.” Based on the rate of year over year revenue decline already seen, but not assumed going forward, we believe the fund balance will be exhausted much sooner. Furthermore, the resources expended for enforcement for outdoor grows is already insufficient to protect neighbors with many unresolved complaints, which is likely to get worse as more outdoor grows are permitted.
4.   Local Taxes will not determine business success or failure:  As highlighted in the Staff’s 2023 report quoting HdL’ s report: “Any change to the basis or rate of the County’s cultivation tax is unlikely to make a difference in which businesses succeed or fail. Factors such as: proximity to markets, cultivation infrastructure, operating efficiencies, producing under contract and distribution agreements are more indicative of business success than tax rates (p. 4)”.
5.   Overall goals of the program are not being met:  In March of 2017 over 70% of Sonoma County taxpayers voted for Measure A to tax the cannabis industry for the benefit of multiple county programs.  Measure A's goal was “...to fund essential county services such as addressing industry impacts, public safety, fire, health, housing, roads, and environmental protection..." (See attachment A).  Since the current tax rates are not even paying for the program, let alone achieving the goals of Measure A, it makes no sense to reduce further.

The Neighborhood Coalition believes any tax reductions at this time is unwarranted and the County should 1) consider adopting option 3 or 4 in Staff’s summary report, 2) Evaluate the tax methodologies for indoor verse outdoor cultivation to account for the costs to support each, and 3) setup a task force to study and recommend how to the achieve the goals of Measure A.Thank you in advance for listening to and addressing our concerns.Neighborhood CoalitionNancy and Brantly Richardson, Communications DirectorsSonomaNeighborhoodCoalition@gmail.com Attachment A:  Measure A wording:  Here’s the Measure A wording: Shall an ordinance be adopted imposing a cannabis business tax in unincorporated Sonoma County on cultivation up to $38 per square foot (annually adjusted by CPI increases) or 10% on gross receipts, and on other cannabis businesses up to 10% on gross receipts, to fund essential county services such as addressing industry impacts, public safety, fire, health, housing, roads, and environmental protection, with funds staying local and subject to audits, generating undetermined revenue until repealed?Argument in favor of measure A, from Board of Supervisors:“The children of Sonoma County are our most important asset. Implementing these regulations and funding enforcement will reduce the risk of accidental ingestion of cannabis products, increase health education and outreach, and decrease violent crime in our neighborhoods.”Attachment B:  Indoor verse Outdoor cultivation

Recommendation:  County set tax rates for Indoor, Mixed-light and Outdoor to reflect the relative costs to support each cultivation type.  

WHAT CAN YOU DO?

If you are concerned about Tax Breaks for Cannabis Growers only, phone the Supervisors switchboard (707-565-2241) and/or email (see addresses below) and tell the Supervisors you want them to keep their promise to the voters of setting a tax rate sufficant to fund essential county services. Your family’s health is more important than catering to a failing and harmful commercial industry.

1. Become fully aware of the cannabis ordinance changes at the County’s website that impact your property;
2. Visit Neighborhood Coalition Sonoma County to learn more ways you can get involved and help protect your neighborhood
3. Make a donation You can donate online , or you can mail a check to:
   
   Sonoma Neighborhood Coalition
   PO Box 1229
   Sebastopol, CA 95473
   

Our campaign to preserve what we all hold near and dear needs your support. Your tax-deductible donation will fund technical experts and our legal team that are critical to our effort to require the County to protect our environment, children, and the health and safety of our neighborhoods.

The Neighborhood Coalition is a 501(c)(3) nonprofit organization, volunteer-based, dedicated to advocating for proper cannabis and land-use policies that benefit the community. All donations support these efforts.

Thank you for your support and donation.
The Neighborhood Coalition team


Board of Supervisor’s emails
1st District:
Rebecca Hermosillo
Rebecca.Hermosillo@sonoma-county.org

2nd District:
David Rabbitt
David.Rabbitt@sonoma-county.org

3rd District:
Chris Coursey
district3@sonoma-county.org

4th District:
James Gore
District4@sonoma-county.org

5th District:
Lynda Hopkins
Lynda.Hopkins@sonoma-county.org

Please send a copy of your letter to sonomaneighborhoodcoalition@gmail.com

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