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AUTHOR:  “Jordan Zoot.  “aBIZinaBOX Inc., CPA’s
PUBLISHER:  CANNABIS LAW REPORT

 

At the time legalization of cannabis loomed as a potential reality on the horizon, Humboldt County was positioned to maintain as a legal industry the prosperity that cannabis had provided the County for the preceding 30 years. Humboldt County had a well-established cannabis industry with a world-wide reputation for the quality of its product and growers. Of course, cannabis is a controlled substance under federal law and the vast majority of the residents of Humboldt County could have been criminally indicted.

 

Four years ago Humboldt County was poised to reap a share of the financial benefits of cannabis legalization in California. Fast forward. Humboldt County does not even have a place at the adult table. Humboldt County’s cannabis industry is struggling to survive. Many growers have abandoned the industry. A significant number of residents have left for other climates. Real property prices in the County, which briefly spiked upwards, have dropped to pre-financial meltdown levels.

 

Two questions spring to mind. Why did this happen? What can be done? The simple answer to the first question is that the events of the past 4-5 years produced a Boom/Bust cycle. However, the Boom/Bust collapse of Humboldt County’s cannabis industry is far more dire than a simple over-production market collapse. The sky really is falling on Humboldt County’s cannabis industry. The future for the County’s cannabis industry looks bleak.

 

Why has Humboldt County fallen so far and so quickly? It was in the stars! The cannabis industry that developed in Humboldt County beginning in the ‘70s was an outlaw cottage industry with a frontier mentality and libertarian attitudes. A number of growers were financially successful. The darker sides of the industry were to some extent tolerated. The industry that succeeded as an outlaw industry lacked experience in the real world of business to succeed without assistance in the form of leadership and guidance.

 

The political and financial power base of Humboldt County have failed their community. This power base had an opportunity, and to a substantial degree still has an opportunity, to provide the guidance and leadership necessary to salvage a significant share of financial benefits of cannabis legalization for the County. However, as events of the past 18 months have demonstrated, a successful transition will not just happen. Unless the entire County pulls together most of the opportunity that legalization gave the County will be lost.

 

It is quite possible a majority of the population of Humboldt County will be pleased to see the County substantially withdraw from California’s cannabis industry. There will be places in small corners of California’s cannabis industry for cottage industry style cultivation and distribution for the foreseeable future. As a consequence, some Humboldt County growers will survive the shift of California’s cannabis industry away from the County. However, with legalization the remoteness of Humboldt County becomes a handicap for cottage growers. This advantage shifts to those remote areas of California that are far closer to the major markets.

 

In order to understand what the County can accomplish at this late date, we must first describe how the County missed the bus. Proposition 64 passed because it was bankrolled by individuals who saw legalization as a opportunity to make money. Hundreds of millions of dollars have been invested in California’s cannabis industry as a consequence of the passage of Proposition 64. Humboldt County saw little of that money. The vast bulk of the money went to other parts of California – particularly to Southern California. A majority of California’s cannabis market is south of the Tehachapi Mountains.

 

It is not just a proximity to the largest half of cannabis market that drew capital to Southern California. Southern California has land, buildings and water. It has experienced business people. It has a labor pool that is many times greater than the total population of Humboldt County. The County had only a limited opportunity. The County was never going to be more than a source of a commodity. No prudent investor would have ever looked at Humboldt County as a cannabis investment opportunity other than one based on cannabis cultivation. Even from such a perspective, an investment elsewhere would be likely to be more attractive.

 

Those members of the political and financial power base of Humboldt County had an opportunity, and to a substantial degree still have an opportunity, to exploit the resources that Humboldt County has available relating to cannabis. That is not to say Humboldt County should focus solely on cultivation. The political and financial power base of Humboldt County should have launched a concerted two-pronged assault on California’s cannabis industry. This assault can still be launched, but in order to succeed, the assault must be undertaken for the benefit of Humboldt County as a whole.

 

Humboldt County’s entire cannabis industry is a significant player in California’s cannabis industry, but it takes a very substantial portion – perhaps all – of the County’s industry to rise to the level of significant. It is quite likely more money has been invested in California’s cannabis industry in the past two years by Canadian investors than has been invested in the entire cannabis industry of the County in the same period of time. Humboldt County lacks the financial resources and political clout to have significant influence in Sacramento or in the state-wide cannabis industry. Humboldt County must rely solely on the resources it has.

 

As we mentioned above, a two-pronged assault is required. The first prong is obvious. The political and financial power base of Humboldt County must provide as much assistance as possible to preserve and protect the responsible growers of Humboldt County. All other cannabis growers should be quickly and efficiently eradicated.

 

The second- prong may not be obvious to some. The political and financial power base of Humboldt County must utilize every possible resource to cause Humboldt County growers to acquire significant stakes in cannabis businesses outside the County. Humboldt County must benefit financially from all of the business functions involved in the movement of cannabis from cultivator to consumer. The only way the County to do so is for its growers to have significant ownership interests in those business functions – particularly in distributors – that stand between cultivators and consumers.

 

California has made distributors the choke-point in the movement of cannabis from cultivator to consumer. Humboldt County has allowed itself to be placed in the position of being a large collection of small farmers who are at the mercy of the distributors who decide whose commodities get to market. It is critical for all Humboldt County growers – even those growers with the financial resources or connections to be reasonably confident their cannabis will get to market – to understand how critical it is for this dynamic to be swiftly changed.

 

To a substantial degree every Humboldt County grower must set aside the rivalry of trying to be the best or most successful grower in County and focus on securing a fair share of all of the benefits of legalization. The County will secure its fair share of the financial benefits of California’s cannabis industry only if its growers have significant ownership interests in the distributors and the related businesses that effectively control the industry. California’s cannabis industry is quickly evolving into a financially efficient system that moves an agricultural commodity from cultivator to consumer. Long-term financial health for Humboldt County is critically dependent on not being frozen out of the financial benefit of the ownership of a portion of the business functions that lie between cultivators and consumers.

 

There are a wide variety of ways growers can acquire ownership interests in the businesses that move commodities through commercial channels. There are a number of ways the political and financial power base of Humboldt County can support and encourage any such efforts. As we have stated on a number of other occasions, See CA Collectives – Sky Falling, we believe the use of Cannabis Cooperative Associations is the most effective way a group of cannabis cultivators can seize control of their destiny.

 

We have specifically addressed this article to Humboldt County because it has so many growers and such limited resources aside from its cannabis industry. No other county appears to be so dependent on cannabis cultivation for its financial welfare. However, any group of cannabis cultivators can use a Cannabis Cooperative Association to avoid being at the mercy of the financial interests that are taking control of California’s cannabis industry.

 

We encourage cannabis cultivators throughout California to utilize the vehicle the legislature gave them in SB 94. Long-term survival for many California cultivators will likely depend on banding together through Cannabis Cooperative Associations.

 

Further Notes & Resources Pertaining To Humboldt County

Commercial Marijuana Permitting

The Commercial Medical Marijuana Land Use Ordinance was adopted by the Board of Supervisors became effective Friday, February 26, 2016. This is the date the Planning and Building Department began accepting applications for projects in the Inland Zone.  The deadline for submitting applications was December 31, 2016.

Cannabis Permit Application Processing

Please see thisJune 26, 2018 Cannabis Cultivation update letter from Director Ford.

Permit Application Resources

The documents below will be updated over time.  The most recent versions can always be found on this page.

Application Checklist for Cultivation (Updated 7/21/16)

Application Overview and Resources (Updated 9/6/16)

Dispensary Application Checklist (Update 8/19/16)

DEH Worksheet for Commercial Cannabis Clearance

Acknowledgment Form (Updated 7/20/16)

Indemnification Agreement

Performance Standards for Cultivation and Processing Operations

Frequently Asked Questions

April 28, 2017 update letter from Director Ford regarding the cannabis permit application process and concerns.

March 3, 2017 Cannabis Panel Meeting Summary

Application Permit Transfer Request Form

Other Resources

Web GIS
Streamside Management Area Ordinance (PDF)
Division of Environmental Health
CalCannabis – California Department of Food and Agriculture