Jessica Cejnar Andrews / Friday, Dec. 15, 2023 @ 1:29 p.m. / Cannabis, Local Government

Del Norte County Supervisors to Reconsider Cannabis Retail Tax Rate After Sole Proprietor Closed Dispensary Last Spring

Del Norte County supervisors will explore potentially lowering the cannabis retail tax rate at its next meeting in January. | LoCO file photo


Proposal to Reduce Cannabis Tax Rate for Retailers in Del Norte County Fails; Tax Affects One Business Currently



After the treasurer-tax collector said Del Norte won’t see any revenue from its cannabis retail tax this year, District 3 Supervisor Chris Howard asked his colleagues to explore possibly reducing the rate.

Howard asked his colleagues Tuesday to consider tabling a proposed resolution that would set the cannabis retail tax rate for the 2024 calendar year. The county supervisor pointed out that one now-former cannabis retailer, Robert Derego, has consistently argued that the current 6 percent tax rate put him at a disadvantage with his competitors operating within Crescent City limits.

Howard said he hoped Derego would encourage others in the industry to weigh in on what a fair tax rate would be.

“It wasn’t the intent of the voters, by passing the ordinance that set the rates, to put these places out of business,” Howard said. “I don’t know if it’s too late to make a change to allow an individual to stay in business. I’ve certainly heard this long enough to know it’s possibly worth a try. And, maybe if not for this individual, maybe another has an interest in opening up a retail business.”

Del Norte County voters approved Measure B in 2018. The measure imposed 2 percent to 6 percent tax on retail cannabis sales. It also imposed a tax of 1 to 3 percent on the gross receipts of a cannabis manufacturer.

The county’s revenue from that tax last year was about $58,000, which included receipts from Elk Valley Rancheria’s cannabis cultivation operation, Del Norte County Treasurer-Tax Collector Barbara Lopez told supervisors. Two years ago, the cannabis tax netted the county about $85,000, she said.

“This year it’s going to be zero at this point, which is not a huge amount,” Lopez said.

Derego had owned the Sticky Grove cannabis dispensary at 1070 U.S. 101 just outside Crescent City’s northern boundary until he closed it on April 14, 2023. In a Facebook post about 10 days prior, Derego said the county’s unwillingness to lower the tax rate contributed to his decision to close the dispensary.

On Tuesday, Derego read from that post.

“'For years now we had to hold hands with county politicians, and they are some slimy hands,'” he said. “'Last year, the county set the tax rate as high as they could, as they always have against me, in favor of city competitors.'”

Earlier at that meeting, during a discussion of a budget transfer of $10.8 million in Encampment Resolution Funding grant dollars for a multi-faceted project to tackle homelessness, Derego said he still held the lease on the former Sticky Grove property.

Del Norte Mission Possible is in negotiations to purchase that 1070 U.S. 101 property for an emergency homeless shelter.
Derego estimated that Sticky Grove brought the county about $100,000 in taxes, including sales tax, some years.

In December 2021, the last time county supervisors were asked to set the cannabis tax rate, Derego threatened to close Sticky Grove unless supervisors used it for disadvantaged youth. He argued that he was the only cannabis retailer in the county’s jurisdiction.

At the Board of Supervisors’ Dec. 14, 2021 meeting, District 2 Supervisor Valerie Starkey had proposed lowering the rate to 2 percent. That motion failed by 2-3 vote.

On Tuesday, in response to Howard’s question if he was the only cannabis retailer in the county, Derego answered in the affirmative and reiterated that the county’s tax rate put him at a disadvantage with other retailers in the city, which doesn’t tax cannabis.

Derego suggested the Board rewrite its commercial cannabis ordinance to suspend annual hearings before the Planning Commission for people wanting to renew their sales licenses. He said he wasn’t sure he could get a majority vote on renewing his license.

“Every year I would plan to close,” he said. “The one thing you have in retail and business, really, is buying power and I would shut off my buying power right before 4-20 and slim out my inventory [in case] I didn’t get my vote. Changing the ordinance and limiting the tax disadvantage would have kept me going.”

On Friday, Derego said if the Board of Supervisors decided to lower the cannabis retail tax rate to 2 percent or dedicate all 6 percent to a program for a disadvantaged group of people — something outside the general fund — he would reapply for his sales license in the spring.

The Board of Supervisors is expected to renew the cannabis tax rate discussion at its Jan. 12 meeting.


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