Fearing economic collapse, cannabis growers lobby for sharply reduced county cultivation tax.

When the first green sprouts of cannabis appeared out of the soil in containers in a corner of his greenhouse, first-time farmer Jesse Melendrez celebrated. He left behind a 30-year career in human resources for a “rare opportunity” to lease the greenhouse in Monterey County last year and build a legacy for his family. He spent at least six months fixing up the dilapidated structure before starting the first growing season.

Then came the cold weather and fog, and along with it the plagues of mold, mildew and spider mites that every cannabis grower in Monterey Country has to combat. The topper was a plague of another kind: a tax bill, before Melendrez – who invested more than $600,000 of his family’s money – had even made any money on his crop.

“We started off last year with 10 employees,” he told the Monterey County Cannabis Committee on May 7. “When the December tax bill came, it was either pay the tax or reduce the headcount.” He laid off five people and paid the tax. He brought four of his remaining workers with him to the committee meeting, dressed in their work clothes: T-shirts, jeans and scarves on their heads covered with ball caps.

Melendrez was one of several growers who came to tell Monterey County supervisors Luis Alejo and John Phillips, who serve on the cannabis committee, that the county’s cannabis cultivation tax of $15 per square foot of canopy is killing the county’s fledgling legal cannabis industry. The tax was determined two years ago, when both growers and county officials admit they thought the county’s cannabis yields would be substantial. Since that time, a wildly fluctuating market, lower yields than expected and an added state cultivation tax of $148 per pound has growers pleading for relief. They told Alejo and Phillips that the $15 rate – one of the highest in the state – is driving investors away and stifling expansion.

Supervisors have already signaled they are open to reducing the tax rate. On May 7, county staff recommended lowering it to $10 per square foot. Alejo said that rate was still too high, instead agreeing with local industry advocates who are requesting a rate of $4 per square foot.

Rob Weakley, president and CEO of INDUS Holding Company and a board member for the California Cannabis Manufacturing Association, claimed he will be able to quadruple his company’s cultivation rate if the tax goes down to $4, and increase his staff from 35 to 100, translating to a $5 million payroll.

“We have to look at job creation infrastructure, property tax, the whole picture,” he said. “Let’s keep all these people in this room employed and living in this county.”

Alejo moved to approve the industry request, but Phillips said he couldn’t support that large a decrease – he recommended $7.50 or $8 per square foot, in part to finance enforcement of black-market growers which hurt legal enterprises. Alejo compromised, and they recommended a range between $4-$7.50 a square foot, which will go to the Board of Supervisors for consideration on May 22.

Melendrez is pleased with the outcome of the committee meeting. “Help us succeed,” he says, “and better things will come for the county and its residents.”