How Legal Weed Is Killing America’s Most Famous Marijuana Farmers

Great news—the legalization of marijuana is now bankrupting marijuana growers.  As the California Political News and Views has reported numerous times, the purpose of legalization was not to make it safer to buy marijuana—but to promote the illegal sales and make it safer for the drug cartels in the United States.  You will see raids on marijuana growers that are illegal.  Are these really an effort to get rid of ALL growers and sellers—or just to get rid of the competition?

“In theory, business should have gotten better for Mulder after voters passed Proposition 64 in 2016, legalizing recreational marijuana. But the opposite has happened.

Thomas Mulder had to dip into his retirement fund and his children’s college fund to keep from closing the farm after recreational marijuana was legalized in California

The costs of shifting his farm from California’s loosely regulated medical marijuana program into the stringent legal market have been high. Mulder actually lost money last year—the worst loss his farm has ever experienced—and he had to dip into his retirement fund and his children’s college fund to keep from closing. A few years ago, his retirement savings totaled over $80,000. “

Along with the homeless crisis, CalPERS crisis, government education and affordable housing shortage, we now have a legal marijuana crisis.  You can’t make this stuff up!

How Legal Weed Is Killing America’s Most Famous Marijuana Farmers

In the forests of Northern California, the regulatory state—not the DEA—is forcing thousands of growers out of business, or back underground.

By NATALIE FERTIG, Politico,  6/4/19 

EUREKA, Calif. — On a sunny day in the spring, Thomas Mulder walked through his greenhouse, down a narrow path between two long, knee-high, wooden planters. In a few weeks, the greenhouse would be full of marijuana plants a foot or two high—indica-sativa hybrid strain Sour G, or White Tahoe Cookies with its characteristic golden hairs around the flower. A few more months and the plants would reach Mulder’s shoulders. But at that moment, the planters were empty as Mulder gestured with his hands to show how tall his crop would eventually become. Mulder has three greenhouses that sit on this flat patch of land deep in the mountains of Humboldt County. This part of his farm is accessible only by a steep, newly pavedroad that passes in and out of Humboldt Redwoods State Park, and giant trees crowd so close on either side of the property that you don’t even notice Mulder’s farm until the last bend of the road.

It’s pretty obvious why Mulder’s parents chose this place in the late 1970s to grow marijuana. Back then, camouflage ropes pulled tall branches over the clearing to hide the illegal but highly prized crop from Drug Enforcement Administration helicopters; huckleberry bushes grew among marijuana for extra concealment. Now, the array of bright white buildings would be easily spotted from above, that is if anyone was up there looking. The berry bush camouflage came out when Mulder bought this land a decade ago when California became the first state to approve medical marijuana.

Since then, as the stigma around marijuana has evaporated in a grassroots legalization movement that has swept the nation, Mulder’s farm has thrived in a three-county region known as the Emerald Triangle that has become to high-grade cannabis what Napa Valley is to wine—a tentpole of the Northern California economy. In an ideal season, Mulder’s farm produces about 1,000 pounds of cannabis, an amount that should earn him $1.5 million. After taxes, fees and farm operating expenses, Mulder can expect about $100,000 in net income. It has afforded him enough money to own his own house and set aside a retirement account and a college fund for his children.No longer an outlaw like his parents, Mulder is the very picture of middle-class respectability. He has served on the local school board for a decade without anyone batting an eye at how he earns a living.

In theory, business should have gotten better for Mulder after voters passed Proposition 64 in 2016, legalizing recreational marijuana. But the opposite has happened.

Thomas Mulder had to dip into his retirement fund and his children’s college fund to keep from closing the farm after recreational marijuana was legalized in California

The costs of shifting his farm from California’s loosely regulated medical marijuana program into the stringent legal market have been high. Mulder actually lost money last year—the worst loss his farm has ever experienced—and he had to dip into his retirement fund and his children’s college fund to keep from closing. A few years ago, his retirement savings totaled over $80,000.

Mulder is not alone. As industrial-sized growers in places like California’s famously fertile Central Valley have flooded the market, the price of legal marijuana has plummeted by more than half. An array of upfront fees and stricter regulations, combined with a lack of access to bank loans, are all reasons farmers in Humboldt and neighboring Mendocino and Trinity counties say they can’t afford to remain in the legal market. Only 2,200 farmers applied for cannabis licenses last year, according to California NORML, compared with the estimated 30,000 or more growers who existed in the Emerald Triangle pre-legalization. It’s hard to know how many of the rest are continuing to grow in the illicit market. An estimated 10 percent of growers have simply shut down. Some expect that number to rise fivefold by year’s end.

“The regulatory climate in California and the cost of all of those regulations certainly does make the prospect of a viable small farm really small,” says Trillian Schroeder, a cannabis farm consultant in Humboldt County.

In effect, legal marijuana is doing what the DEA’s war on drugs never managed to accomplish. Some observers fear the era of cannabis in Humboldt—legal and otherwise—is over.

Mulder voted for Prop 64, reasoning that the initial proposals—like a one-acre cap on licenses—were designed to help farmers. But now he’s not so sure it was the right call.

 “I don’t want to see more victims of the war on drugs,” Mulder says. “But now it’s different because it’s a different war—it’s pricing [farmers] out.”

“I wish I could go back in time,” he says. “Maybe not pass Prop 64.”

***

When medical marijuana was first legalized with the passage of the Compassionate Care Act in 1996, some of Humboldt’s farmers were wary of coming forward and registering with a government they had seen for so long as the enemy. Eventually, though, many came out of the illicit market to grow in licensed medical collectives. The medical industry that existed from 1996 to 2016 had some regulations—there was a limit to the number of plants a farm could grow, for example, set by each county individually. Farmers had to apply for a license and pay taxes to the state. And in the late 2000s, some towns—such as Oakland—started putting local sales taxes in place. But in the spectrum of regulatory oversight, it was a modest burden.

Under Prop 64, though, cannabis has become what some in the industry call “the most regulated crop in the nation’s most regulated state.” Each plant must be meticulously monitored through a central system called “track and trace.” There are separate state and county regulations, and the county requirements—from additional taxes to environmental impact studies—can be drastically different for farmers in different parts of the state. And where farmers once paid just income and maybe some sales taxes on their medical marijuana, they are now paying taxes before they grow, after they grow, and after they sell.

Zoning certificates and water board fees can cost $3,000 to $5,000, but the biggest costs come in environmental and structural changes to the property. Many Humboldt farms lie in the mountains, deliberately out of the way to avoid easy detection, at the end of long dirt roads that are hard to navigate. Paving the dirt roads alone can cost over $100,000.

Some farms have discovered their land includes habitat for endangered species like the spotted owl. When these farmers apply for construction permits to meet Prop 64 requirements like paved roads or new, California Department of Agriculture-compliant processing facilities, they are told they need to wait two years for an environmental impact study, certifying the proposed changes won’t disturb endangered habitat. The farmers are caught in a bureaucratic trap: If they don’t build immediately, the farms won’t be considered compliant, and therefore may not receive a new license to keep growing.

Other farms have man-made geological features, such as culverts, that were put in by previous tenants—often loggers. Under state and local regulations, these man-made features have to be returned to a more ecologically friendly form, a process which also requires engineering fees and construction costs to repair.

And for farms that have good existing infrastructure on good land, there are still high taxes and fees they have to pay in addition to their startup costs. The “canopy tax” is a county tax on the space in which a farmer will grow his crop—levied before anything is grown. Last year, it was $1 per square foot. Many farmers grow multiple plots of 5,000 or 10,000 square feet, so canopy taxes can quickly reach the tens of thousands of dollars. The cultivation tax, meanwhile, is a state tax levied on harvested marijuana before it is sold, regardless of whether it sells. Neither the canopy or cultivation taxes supplant state or federal income taxes, which also have to be paid on the revenue from cannabis sales.

For Mulder, the cultivation tax on dried cannabis flower last year was $148 per pound. After paying it, a modest $15,000 profit turned into an $80,000 loss.

“It’s death by a thousand cuts,” says Schroeder, the farm consultant.

TO SEE THE COMPLETE ARTICLE CLICK ON THE HEADLINE

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.