Natalynne DeLapp, HCGA

Goo

d afternoon. My name is Natalynne DeLapp; I am the Humboldt County Growers Alliance (HCGA) executive director. HCGA is the trade association for our local cannabis industry. Our mission is to preserve, protect, and enhance Humboldt County's world-renowned cannabis industry.


I am here representing nearly 30% of Humboldt County's 1,000 independently owned and licensed cannabis businesses. The vast majority of our farmers are "legacy operators" who voluntarily complied with Humboldt County, and the state's legalization, regulation, and taxation scheme.


Over the past five years, here at HCGA, we've had the privilege of representing an incredible, resilient and capable group of people. These people are your friends and family members–this is your community, and they are vital to our collective success.


We are standing here today asking not for a handout but a reprieve from Humboldt County's flat-rate cultivation tax. A tax that does not adjust with market conditions. When Measure S was written and voted on in 2016, the wholesale price of cannabis was at least four times higher and propped up by prohibition. The cost of producing cannabis was lower because California had not yet implemented its licensing fees and taxation structures, nor had the expenses of bringing pre-existing farms into compliance with environmental laws been realized.


Humboldt County's Measure S is a marijuana cultivation tax of $1, $2, and $3 per square foot of cultivation, and it is paid in two installments, the first in March and the second in October. Last year in October, in response to the collapse of the wholesale cannabis market, the Board of Supervisors authorized farmers to pay their October tax bill late, without penalties, by May 31 of this year. But what that created was a balloon payment situation with payment due in March and payment due in May. So here we are in January, and the market is still flooded, and prices are at or below the cost of production. Farmers are sitting on product in a highly competitive market, and if they are lucky enough to sell it, it is on consignment terms, not cash in hand.


Self-funded cannabis businesses cannot survive two years of deficit profits. Moreover, the proverbial "pickle barrels of cash" have long since been depleted, having been spent on county land use permitting. And legal cannabis businesses have no access to outside capital or bank loans, or any financial support offered to traditional agriculture.

No other industry is subjected to an entitlement tax like cannabis, meaning no other business that is permitted to operate in Humboldt County has to pay a tax directly to the county for the opportunity to participate in the economy.

For the record, cannabis businesses do pay taxes. They pay taxes on their taxes because the federal government prohibits cannabis businesses from writing off everyday operating expenses that all other companies can use. In addition to the county cultivation tax, as farmers improved their property through permitting, their lands were reassessed for increased property taxes paid directly to the county. Farmers also pay state, and federal income tax, state cultivation taxes.

Since 2017, permitted cannabis farmers have paid 80% of Measure S tax bills in full. Our industry has been willing and able to pay taxes to our county that benefit the greater good. To date, more than $47.5 million has been deposited, mostly in cash, to the county's general fund account. We acknowledge the wide variety of benefits that our community receives for mental health services, education, public safety, etc., due to the taxes we've paid.

Now we are asking our community to give us a lifeline by Suspending Measure S to continue our efforts to be upstanding and contributing members of our society.

Specifically, we are asking for the tax payment from October 2021 to be forgiven and March 15, 2022, to be waived. We are then asking for a suspension of Measure S for an additional year, during which time our community can come together and come up with a plan to develop a new tax strategy that is fair and equitable. We are telling you there is no money left. The county cannot squeeze blood from a stone.