Jessica Cejnar Andrews / Tuesday, Jan. 23 @ 4 p.m.
Attempt to Lower Del Norte's Cannabis Tax Rate Fails; Crescent City Mayor Explains Thinking Behind City's Regulations
A proposal to reduce Del Norte County’s cannabis retail and manufacturing tax rates failed.
District 3 Supervisor Chris Howard made a motion to reduce both the cannabis retail and manufacturing tax rates to 2 percent for the 2024 calendar year. This recommendation came after Howard pointed out that the owner of the county’s only cannabis dispensary has consistently argued that it put him at an economic disadvantage with competitors in the city limits.
On Tuesday, however, Howard’s motion died due to lack of a second. Three supervisors approved a subsequent motion from District 1 Supervisor Darrin Short to keep the cannabis retail tax rate at 6 percent and the manufacturing tax rate at 3 percent for the calendar year.
Howard voted against this motion. District 2 Supervisor Valerie Starkey was absent.
The county’s 6 percent tax on retail cannabis sales is the product of Measure B, which Del Norte voters approved in 2018. The measure imposed a 2 percent to 6 percent on retail cannabis sales within the county as well as a 1 to 3 percent tax on the gross receipts of a cannabis manufacturer.
Robert Derego, who had owned the Sticky Grove cannabis dispensary at 1070 U.S. 101 just outside Crescent City’s norther boundary, paid the county’s tax until he closed the dispensary on April 14, 2023.
On Tuesday, he reminded supervisors that not only did he pay the county’s 6 percent cannabis retail tax, he also paid a 15 percent state excise tax and sales taxes.
In response to a previous commenter, Paulette Einem, who argued that cannabis was a harmful substance "people have the freedom to use," Derego said marijuana isn’t like alcohol.
“Drug dealers don’t write off business expenses,” he said. “I’ve never ralphed all over myself on the ground and said, ‘Lord, please, will somebody hold my hair!’ You guys have an alcohol problem.”
Derego said he closed the dispensary out of protest because he felt the 6 percent tax was punitive. He asked supervisors to reduce the rate to 2 percent and he would continue to operate or keep it at 6 percent but donate the proceeds to a youth group.
“I said I could get you to $100,000,” he said. “I’m really good at business. I’m good at stopping and going at things, actually, but I could get you to $200,000 and that would mean something to a youth group, but it means very little for your general fund.”
Derego had made a similar request in December 2021, threatening to close Sticky Grove unless supervisors dedicated the taxes he pays to a program for disadvantaged youth.
At Howard’s invitation, Crescent City Mayor Blake Inscore spoke about the process he and his colleagues went through to establish the city’s commercial cannabis ordinance.
Inscore told supervisors that one question he and his colleagues asked was how much business legalizing cannabis would bring to Crescent City.
Councilors acknowledged the potential economic opportunity, Inscore said, but didn’t want commercial cannabis to be much of a revenue generator. They also considered the state taxes retailers were already paying, he said.
Inscore noted that potentially adding to those taxes may have prevented someone from exploring whether or not cannabis retail was a viable business venture.
“We did some research with local people who were involved in cannabis,” Inscore said. “And in doing so, we simply made a decision that we were going to set the bar low and determine what the market said.”
The cannabis retailers within city limits have complied with local ordinances and have not been a problem for law enforcement, Inscore said.
According to the mayor, the proprietor of one dispensary — Eric Guinther, who co-owns Fifth and Green LLC with the city’s former community development director Eric Taylor — suggested the city take another look at its commercial cannabis ordinance. Inscore said Guinther had suggesting capping the number of dispensaries within city limits during that process.
“Our comment was maybe it’s time for the city to look back at the ordinance,” Inscore said. “We’ve seen what the market has done. Are we properly positioned with our ordinance? Should we address tax and can you set a moratorium or do you [set] the tax and then does that create your moratorium? We wanted the market to try to figure it out. We wanted to make sure we were keeping people safe, but also at the same time providing an opportunity, if there was one, for economic development.”
Howard also invited County Treasurer-Tax Collector Barbara Lopez to weigh in on the cannabis retail tax. She punted the ball back to county supervisors.
“The way the ordinance is written it really puts the power in your hands,” she said. “The general fund dollar amounts that are lost is, I think, minor in the grand scheme of things — Mr. Derego paid about $20,000 to $25,000 a quarter. It’s a lot, but it’s not a ton of money. But I have no intention of weighing in because it would be a personal choice for me and that’s not where I stand as an elected official.”
At the Board’s Dec. 12 meeting, Lopez said the county’s revenue from the cannabis retail and manufacturing tax last year was about $58,000, which included receipts from Elk Valley Rancheria’s cannabis cultivation operation. Two years ago, the cannabis tax netted the county about $85,000, Lopez said.
This year, the cannabis tax was expected to generate zero revenue “at this point,” Lopez said on Dec. 12.