After 11 consecutive quarters of increasing tax revenues for cannabis growers, Santa Barbara County was faced with reality in the fourth quarter of fiscal year 2020-21, when revenues fell 34% from the previous quarter. and are down 45% from the fourth quarter of 2019. -20.
During the 2021-2022 Budget workshops in April, supervisors discussed making cannabis taxes an ongoing source of revenue rather than one-time funds.
Staff recommended considering only a portion of current income and maintaining a reserve to even out peaks and troughs – like this one – in the flow of cannabis taxes.
Fourth-quarter cannabis tax revenue for the fiscal year ended June 30 was $ 3.8 million in a report submitted to the supervisory board on Tuesday.
In comparison, Q3 revenue was $ 5.1 million and Q4 2019-2020 revenue was $ 5.5 million.
But Steven Yee, political and financial analyst for the county, said the report contained good news: Overall cannabis tax revenue for the year – at $ 15.7 million – was up 29% from in total for the previous financial year.
Yee said the county did not have access to the data needed to identify the reasons for the decline in fourth quarter revenue.
“But based on the information we have now, it appears that statewide an oversupply of wholesale cannabis products is starting to grow, much like in other states that have legalized … cannabis use by adults before California, such as Colorado and Oregon. âYee said.
He said that a glut in the market lowers prices, which reduces sales revenue and, in turn, reduces tax revenue.
But Yee pointed out that only 11 of the county’s 112 cannabis operators had not reported gross revenue, the least since the program began. He said this indicates compliance with state and county regulations is increasing.
Cannabis taxes collected for the fourth quarter came from 58 operators who reported gross revenue, while 43 operators – in fact, 43 licensees – reported having no gross income for their operations.
Yee noted that some operators hold multiple licenses and may have reported gross revenue for one type of license but not for others.
Brittany Heaton, the county’s senior analyst for cannabis, said zero gross receipts could be reported because operations just went live in Q4 or because nursery licensees are providing their own cultivation operations.
She said having zero gross sales is also likely a factor in the seasonality of the cannabis industry.
To date, the county has received a total of 181 land use permit applications, of which 30 have been withdrawn, one has been denied, 82 are under review, 22 are pending, 34 have been issued and 12 are on appeal, according to the report.
But operators who have yet to obtain land use permits and business licenses are quickly approaching a bottleneck – the limits of cultivated areas – that could undermine their projects.
âCulture caps fill up quickly,â Yee told supervisors.
The county has set a cultivation limit of 186 acres in the Carpinteria agricultural overlay area and 1,575 acres for the remainder of the unincorporated area. When these ceilings are reached, potential operators who have not obtained land use permits and business licenses will be left behind.
So far in the Carpinteria overlay area, permits have been issued for 46 acres and applications for an additional 176 acres are pending, bringing the total to 222 acres, 36 acres above the cap.
But in the rest of the unincorporated area, demand is almost double what is available, with 502 acres authorized and 2,619 acres in project for a total of 3,121 acres, or 1,546 acres more than the total. ceiling.
Heaton advised holders of approved land use permits to “get into the business license process immediately if they want a place in the acreage cap.”
By the end of the fourth quarter, 24 business licenses had been granted, with 58 more pending for cultivation, 29 for nurseries, 10 for distributors and two for off-store retail operations.
Yee said most of the pending business licenses are for applicants who have yet to secure land use permits.
Regarding retail storefronts, Heaton said potential operators ranked No.1 for Santa Ynez and Los Alamos have submitted applications to the Planning and Development Department.
The top-ranked potential operator for Orcutt – finalized as East Clark SB, doing business as Cookies, after calls were resolved – has until mid-November to submit a store request to 1604 E. Clark Ave.
âBut we expect they will be submitted shortly,â Heaton said.