Cannabis tax revenues continue to increase in Santa Barbara County, with a reported $5.1 million collected in the third quarter of fiscal year 2020-21.
Fiscal analyst Steven Yee of the County Executive Office said that it represents a 160% increase in the amount collected over the same quarter last year, and the revenues could reach $16 million for the current year, much more than the budgeted amount.
The county oversees the local cannabis industry, including cultivation, processing, distribution and retail businesses.
The county expects cannabis-related revenues to keep growing and raise $19 million next year, according to the recently adopted budget.
About $8 million of the $19 million in cannabis tax revenues will be spent on county cannabis program administration and enforcement costs, and another $5.5 million was dedicated to other ongoing expenses, not all cannabis-related, according to the County Executive Office.
Most of the cannabis-related tax revenues have come from cultivation so far, but the county expects to permit and license retail dispensaries within the next year.
The county capped the number of dispensaries at six, and the top-ranked applicants have until July 30 to submit a complete permit application, according to Brittany Heaton, who works in the county’s cannabis program.
Applicants were ranked for five of the six areas: Toro Canyon/Summerland, Eastern Goleta Valley, Isla Vista, Santa Ynez and Los Alamos. The Orcutt community plan area dispensary location is being contested in court.
Cannabis Permitting Update
Santa Barbara County supervisors decided to allow some operators to grow marijuana as “legal nonconforming” uses while they pursue local land use permits and business licenses, a decision the Grand Jury and community members have criticized for its potential abuse and nuisance issues, including odor.
Last year, the county reported that 199 of its 270 acres of active cannabis cultivation were by “legal nonconforming” operators.
Now, Yee reported that there are 382 acres of cannabis cultivation in the county associated with active state licenses, 355 of which are in the inland and coastal unincorporated area, and 27 of which are in the Carpinteria area.
As of March, the county was home to 1,551 state cannabis licenses, and most of them were provisional ones held by “legal nonconforming” operators, according to the county report.
About 30% of the licenses were annual licenses, which have a higher threshold for approval and are reviewed yearly.
Some of the businesses allegedly expanded their cannabis operations, which is not allowed under local ordinances, but received county permits anyway. Another grower had his permit approved months after being cited for violating air quality rules by using diesel generators as the main power source for his farms near Buellton.
The county set caps of 186 cultivation acres for the Carpinteria Valley and 1,575 for inland areas, and proposed acreage in applications continues to exceed those caps, Yee said.
“Through the third quarter, the proposed cultivation acreage associated with permit applications continues to exceed both cultivation caps,” he said. “Based on the substantial demand to conduct commercial cannabis cultivation activity in our county, not all applicants will be able to reserve their acreage under the respective caps that (the) board has adopted.”
Approved acreage could hit the cap by the end of 2021 on the short end, or the end of 2022 on the long end, according to Heaton.
Yee said the Planning and Development Department approved seven land use permits for cannabis cultivation in the third quarter that are issued or going to be issued soon, and approved another seven that community members appealed and have pending hearings.
To date, 69 operators have applied for a total of 119 cannabis business licenses, and the county has issued 24, Yee said. Pending license applications are mostly because of applicants not having a permit yet, which is required first, he said.
Third District Supervisor Joan Hartmann asked if the county was going to notify the unpermitted, legal nonconforming operators before the acreage caps are met so they have time to phase out their operations.
“I think it is something we should think about ahead of time to begin to notify people that they’re at risk and that they can’t be legal nonconforming without permits forever,” she said. “We’re going to have a lot of land use permits for cannabis without business licenses, that’s an interesting dilemma.”
Heaton said that the county is working to address these issues before it gets so close to the acreage cap that it runs into concerns from applicants and the business licensing team.
Heaton said the county is using an online portal to shorten the application review process and will be adding staff positions to speed up review.
“We’ve made some significant strides in the last quarter that we think cut out approximately two months of the process in consolidation of a one-step process that applicants go through compared to the three-step process that existed before,” she added.
The county is also working on a report to evaluate joining the California Cannabis Authority membership, Heaton said.
“This is a way that we can receive data analytics to assist in the data oversight of cannabis compliance, administration, regulation, and also give us better tools to predict revenue for the future,” she added.
Recent Cannabis Enforcement
The Cannabis Compliance Team, which includes Sheriff’s Department employees, conducted multiple raids in the most recent quarter and eradicated 594 cannabis plants and confiscated 123 pounds of cannabis product, totaling an estimated street value of $600,000, according to the county.
The compliance team executed four search warrants and six arrests were made related to illegal indoor cultivation and illegal delivery services.
The county recently filed a public nuisance lawsuit against a grower, and filed four notices of noncompliance to cancel state licenses.
Planning and Development responded to 103 cannabis complaints, 97 of which were related to cannabis odor complaints in the Carpinteria area.
Managing editor Giana Magnoli contributed reporting to this story.