Cannabis tax revenues continue to increase in Santa Barbara County, with a reported $2.6 million received in the last quarter.
Financial analyst Steven Yee of the County Executive Office said the figure represents a 30 percent increase for the quarter that ended Dec. 31 from the same period in 2019.
“Cannabis tax revenues continue to remain strong despite the economic impact of the (COVID-19) pandemic,” Yee told the Board of Supervisors on Tuesday during a second-quarter report on cannabis compliance, enforcement and taxation.
Based on the amount of revenue received in the quarter, staff estimates that cannabis tax revenues could generate as much as $14 million in the current fiscal year, which ends June 30, according to a letter filed with the board. That is about $3.4 million more than the anticipated revenues for the year.
The tax revenues were received from 56 operators that reported gross receipts, Yee said. Over the quarter, 37 operators reported zero gross receipts and 25 operators did not submit any reports.
Some of the operators that did not generate gross receipts hold both nursery and cultivation licenses, and use their nursery operations to feed cultivation operations so no gross receipts are generated, Yee explained. The seasonality of the growing cycles for some outdoor operators also may cause them not to generate gross receipts, he added.
Of the 25 operators that did not report at all, some are no longer active and hold state provisional licenses that are due to expire, said Brittany Heaton, the county’s principal cannabis analyst. Some operators have multiple operations and report under one name, which should not be the case, she added.
“I think there’s been a little bit of a misunderstanding,” she said. “Several operators didn’t think they’d need to report.”
Heaton said consequences for operators that do not report receipts can be as simple as an initial warning and a reminder, and as extreme as contacting the state to withdraw their authorization.
Six new projects were submitted to the Planning and Development Department in the last quarter, five projects were appealed and two are pending issuance, Yee said. One land-use permit was issued.
To date, the department has received 174 projects, and of those, 30 were withdrawn or closed and one project was denied, Yee said. Twenty-five of the projects received issued permits and 10 are currently on appeal.
Five permits are currently pending issuance, meaning that applicants completed the land-use entitlement process but have outstanding items due to permit issuance, Yee said.
In total, 103 of those projects are pending action or under review, he added.
Yee said the county has issued 20 business licenses to 12 different operators to date. The Planning and Development Department has received a total of 90 cannabis business license applications and 70 are currently pending.
“A majority of the pending applications are due to operators not yet having obtained an issued land-use permit, a requirement of obtaining a business license,” he said.
There are applications for more acreage than is allowed under the county cultivation caps of 1,575 acres for inland areas and 186 acres for the Carpinteria area.
“Not all applicants will be able to reserve their acreage under the restrictive caps that the board has adopted,” Yee said.
Running up against the acreage cap is a big issue as the operators that obtain their acreage aren’t necessarily the ones that started the application process first, First District Supervisor Das Williams noted.
“The question is, is a system that parcels the acreage to them the fairest, or is there anything else that we should do?” he asked, tossing around the idea of shrinking some of the larger operations.
The second phase of the storefront dispensary selection process was completed in the last quarter, Heaton said, adding that applications that reached a consultant score of 85 percent or greater on their business operation plan advance to the next phase.
In all, 20 applications were approved in more than six community plan areas. Six applications from the Isla Vista/Goleta area were approved, as were five from Orcutt, three from the Santa Ynez Valley, and two each from Summerland/Toro Canyon, the eastern Goleta Valley and Los Alamos.
Phase three of the storefront selection process includes a review of the neighborhood compatibility plan and a site visit of each of the proposed locations, Heaton said. The highest-ranked applications in each of the community plan areas will be eligible to start the land-use permit and business licensing process, she added.
The CEO’s office has completed the transition of the business license application to the online software Accela, Heaton said, and full integration of the Planning and Development Department and the CEO’s office into Accela is planned in the next year or two.
Adjustments to the review process are ongoing as additional streamlining opportunities are identified, she added.
In the future, the county will continue to identify ways to better align the land-use permitting process and the business license process, and is working with departments to modify the fee structure to better represent the staff time and effort associated with the processes.
In the last quarter, the Sheriff’s Department cannabis compliance team carried out six enforcement actions and confiscated 64 plants with an estimated value of $32,000, Yee said.
He said an additional 180 pounds of dry cannabis product, including waxes and oils, were confiscated in the quarter, with a value of $315,000.
“Our team remains diligent in investigating operations that do not comply with county code,” Yee said.
In addition to the sheriff’s compliance team, Planning and Development Department and the agricultural commissioner’s staff also continue to respond to complaints associated with issues such as odor or illegal pesticide use, he said.
The agricultural commissioner conducted two investigations about pesticide use in the last quarter and the Planning and Development Department responded to 105 cannabis-related complaints, mostly associated with odors, Yee said.
Eleven new enforcement cases were opened over the course of the year, he added.