03/04/18 Mike McGuire

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This week: The First 60 days of Prop 64. We hear from CA State Senator Mike McGuire, CA State Assembly Member Jim Wood, Tim Ricard with the Sonoma County Economic Development Board, Hezekiah Allen with the California Growers Association, and Amanda Reiman, PhD.

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MARCH 4, 2018


DEAN BECKER: The failure of drug war is glaringly obvious to judges, cops, wardens, prosecutors, and millions more now calling for decriminalization, legalization, the end of prohibition. Let us investigate the Century Of Lies.

DOUG MCVAY: Hello, and welcome to Century Of Lies. I'm your host Doug McVay, editor of DrugWarFacts.org.

The state of California passed Prop 64, to legally regulate the adult social use marijuana market in that state, in 2016. The measure went into effect on January First of 2018. To look at the first 60 days of Prop 64, on March First, the California State Senate’s Governance and Finance Committee, and its Business, Professions and Economic Development Committee held a joint hearing in the town of Ukiah. They heard from state regulators, county and municipal officials, and the public.

Let’s start with opening remarks from the legislators. First up will be State Senator Mike McGuire, who represents California’s Second Senate District, which is North Coast and North Bay. He’s followed by State Assembly Member Jim Wood, who represents California’s Second District, which comprises all of Del Norte, Trinity, Humboldt, and Mendocino counties, plus northern and coastal Sonoma County.

CA STATE SENATOR MIKE MCGUIRE: Thank you so much for coming out in the glorious rain -- am I right? Finally -- for this special joint committee hearing in beautiful Ukiah. In many ways, tonight is truly historic. Instead of the north coast having to drive hours to Sacramento, as many of you already do, to advocate for the issues that are important to our community, tonight, Sacramento has packed up and taken the show on the road.

And we could not be more excited to be with you, to focus on the first sixty days of Proposition 64 here in California. And never before has our region seen so much change, brought about by 57 percent of voters across California passing Proposition 64 in November of 2016. Fifty four percent of voters here in Mendocino County passed Prop 64.

California's now coming out of a prohibition era, and Golden State residents are seeing the migration of North America's largest cannabis market transitioning into the light of a regulated and legal system, estimated to be worth approximately seven billion dollars annually.

This first of its kind hearing will focus on the first 60 days of Proposition 64. This will be one of the largest and most comprehensive events of its kind since the initiative went into effect earlier this year.

And we wanted to hold this hearing here on the north coast because the legal recreational use of cannabis is rapidly transforming our region, and it's transforming the rest of the state in ways we have never seen before.

However, and I think you may all agree, maybe not, nothing about the transition of Proposition 64 has been easy, and that's why we are all here tonight. Legal recreational cannabis has tremendous potential for jobs and economic development. It can generate revenue for our cities and counties, rein in the black market, and help protect our environment and clean up rogue grows.

But if the state gets this wrong, the promise of Proposition 64 won't be kept, and as I have always said, this is a tall mountain to climb, and we are currently building the airplane and flying it at the same time.

And we will not be successful unless we all in this room work together, listen to the leaders on the ground in our local communities, and listen especially to all of you who have taken time out of your busy schedules to be with us tonight.

CA STATE ASSEMBLY MEMBER JIM WOOD: We knew that before Prop 64 passed that counties would have quite a burden put upon them to build a process to support the implementation of medical. Permitting, compliance processes, and all in a pretty tight timeframe. And while everyone knew that local permitting would be a significant undertaking, that role was something the counties actively sought, and we supported.

I believe they have worked in good faith to establish those processes, but as with everything new, you discover issues that need clarification or additional steps.

What we didn't know was that we would have devastating wildfires that would descend upon us beginning on October Eighth, upon two of the three counties represented here tonight. People including cannabis farmers lost their homes and businesses, more than 40 people in our district lost their lives. This disaster has forced cities and counties, with their limited resources, to add to their workload to meet the immediate needs of survivors and to support the building process.

Today, I look forward to gathering information from those of you who have -- so we can assess the needs and determine what can be done to help expedite the process. We know that there are other parts of the state that are aggressively -- may have experienced in the past, is at risk of being lost.

DOUG MCVAY: That was California State Assembly Member Jim Wood, who represents the state’s Second Assembly District. He was preceded by State Senator Mike McGuire, who represents California’s Second Senate District.

Now let’s hear from Tim Ricard. He’s the Cannabis Program Manager for the Sonoma County Economic Development Board

TIM RICARD: So, my position as the Cannabis Program Manager is housed at the Economic Development Board, and this was a decision by the board of supervisors, to have the position that's in charge of the multi-agency implementation not be in a regulatory department. So I get to work with the businesses on a daily basis and help them navigate the regulatory process.

So I wanted to talk today a little bit about some of the challenges those businesses are facing, as well as some of the challenges to local government in implementing our ordinance and Prop 64.

Before we get into that, I did want to briefly touch on the temporary licenses, and congratulate the state. In my experience, that has gone out very smoothly, and efficiently, and we have about 75 businesses in Sonoma County that have received local authorization and got temporary permits, so they have 120 days of business certainty.

However, it is the uncertainty that the cannabis businesses face that I'd like to focus on today. So, part of this uncertainty is to be expected, as these businesses move from the collective model to a profit, for-profit model and a heavily regulated business. However, businesses thrive when they have a high level of certainty and can make informed business decisions to forecast their costs, taxes, and supply of materials.

I talk every day with cannabis businesses that tell me about their difficulty in making plans to move their businesses into the regulated market due to the unpredictability of the local permitting process, their changing relationships with dispensaries and distributors, and the volatile pricing and supply of cannabis that has entered the regulated market. Even longstanding practices, such as trimming at the cultivation site, have become very difficult due to building code requirements.

When every number and date that these businesses have to plug into their pro forma has so much uncertainty, it becomes very scary to risk your life's savings and enter into the regulated market. This is exacerbated by the fact that it can cost tens of thousands of dollars to get your foot into the door, even for small-scale cultivation such as cottage grows.

I feel that those that reach out to me to inquire about the cost and time line of the permitting process, I really feel for them, because I can't provide a lot of certainty. It is at minimum a three month process, and could be up to a twelve month process for a CUP [Conditional Use Permit], and those, as touched on before, can involve a lot of public input, which adds further uncertainty.

From the government staff perspective, the regulators are struggling with the hundreds of unforeseen questions and quirks that come with implementing a new ordinance, especially one that was very quickly out of step with state regulations.

It took a tremendous amount of staff time and energy to develop our ordinance, which was adopted in December of 2016, and start implementing that, and now we're already faced with it being quite out of step with the state regulations, and looking to update it and go through that very large and laborious public information process again in order to update our ordinance.

Just as the businesses that I talk to have a very difficult time projecting revenue, so does local government. Business tax uncertainty -- businesses' uncertainty translates into government uncertainty.

As I mentioned, developing and implementing the new ordinance requires a tremendous amount of staff time, which is why we have a specific local cannabis tax to fund the creation and implementation of the program.

As Tony mentioned, our board of supervisors had the foresight to understand that we have a large existing industry that we could not make illegal overnight. We've had 250 businesses take advantage of the penalty relief program, which allows them to continue operating if they meet certain requirements, and those that have a complete application by June 1, 2018, can continue operating as their permit moves through the process.

This is extremely valuable, as I mentioned, because the permit process can take up to 12 months. This also provides the county with some level of certainty as far as tax revenue for the next fiscal year.

However due to the high cost of permitting and the uncertainty, of the 141 applications that we have received, we've approved five and we have 25 complete applications. So at this time, we would only have thirty businesses legally operating in Sonoma County, and those that would be eligible for taxation. So I'm really hoping that many other businesses can come forward and complete their applications by the June One deadline.


TIM RICARD: So, moving on to some of the financial impacts, or the economic impacts, you know, one of the biggest challenges as I mentioned has been neighborhood opposition.

Many operators have been quietly operating for many years, and without their neighbors knowing, but due to the necessity of public noticing, and the public process, the neighbors are learning about these operations and coming out to -- against them, and as we've seen in places like Calaveras and Yolo County, it can quickly change the direction of a cannabis program and the ordinance.

So, Sonoma County does have a unique position. Many cities can regulate some of the impacts by keeping the operations indoor, and very large, rural counties have large parcels so they can have a lot of separation from residences. Sonoma County has a unique situation, where we have small parcels and ag interfacing with residential development quite frequently.

So this has created quite a bit of conflict, however, it's those smaller parcels near residential ag that are attracting the smaller operators, because they're more affordable and they can have a residence and operate their business. So, I do think that it's very important to support those smaller local operators, because those businesses retain money in the community, and they spend it, and you have a high multiplier effect.

DOUG MCVAY: That was Tim Ricard, he’s the Cannabis Program Manager for the Sonoma County Economic Development Board. Now let’s hear from Hezekiah Allen. He’s the President of the California Growers Association.

HEZEKIAH ALLEN: Growing up on the north coast, legalization was the thing my childhood dreams were made of. Our culture was one of resistance. We grew cannabis not to get rich, we grew to get by.

These ideals came at a cost. Mendocino and Humboldt County have some of the highest arrest rates per cannabis in the state. The impacts of the war were felt disparately in our rural communities. Reducing the crimes, getting people out of jail, cleaning up criminal records: these things can't happen fast enough.

Knowing that a majority of Californians agree with this truth, for which so many have been marginalized and prosecuted, is healing. In that way, legalization is a good thing. However, the devil is always in the details, and there were a lot of details in Prop 64.

It is often suggested that growers don't support legalization because of how it will impact price. Eventually price may become a limiting factor, and it might be a priority issue, but our state is not there yet.

Right now, policy barriers and one time costs are the leading cause of concern. Unfortunately because of time constraints I won't be able to detail the specific challenges that growers face as they work to comply. That said, I can say that the first 60 days of legalization have lived up to our expectations.

Unfortunately, a good forecast does not lessen the severity of the storm. I'd say that in some ways, we are seeing the worst possible outcome: an unregulated market flooded with great products, many produced and sold by people who desperately want a license but are not able to comply.

Consumers are finding better prices, more choices, and better access in the unregulated market. The calls for enforcement are reaching a fever pitch, yet we have barely begun licensing. A vast majority of businesses are unable to obtain permits, and licenses remain elusive. A few businesses describe smooth sailing, as competition is shut out and their advantage in the market is solidified.

From many, I hear that the first 60 days have taught us that no matter how hard we work, how compassionate and community minded we are as business people, we are still at a disadvantage. At times, it's even felt like those values have put us at a worse disadvantage. This is not a lesson I think the state of California wants to be teaching.

The moral legitimacy of this approach must be questioned, especially in light of the role that compassion and justice played in the passage of Prop 215 and Prop 64. Some of the policy outcomes I'm seeing, the behavior I'm observing in the industry, make a mockery of those values.

Legislative action is needed to assure a level playing field, and ensure independent businesses can enter the market. Otherwise, access to capital, position in society, and other forms of privilege that marginalized growers and business owners don't have will continue to be the key components of success.

There are few specific legislative actions that could make a huge difference. First, tax reform. You both know from your work in 2016 that the current tax law is fundamentally flawed, can be improved significantly. Done right, cannabis tax reform is likely the best way to ensure a level playing field. I look forward to talking with both of you about the details.

Second, enforcement priorities. As Casey O'Neill stated last week in the Assembly hearing, enforcement without opportunity is a failed paradigm. Our imperative is that California build an inclusive market, but we also call on the legislature to articulate clear enforcement priorities and guidelines for all state enforcement agencies.

Third, tiered timelines. Wherever possible, state agencies should look for opportunities to extend timelines, especially when it comes to cleaning up decades' worth of environmental damages. Small growers can't fix the problems Big Timber put on our watersheds.

Applying the concept of tiered licenses and fees to these timelines could have a profoundly positive impact in the communities I represent and the watersheds I love.

As to what is coming, my crystal ball is foggy. What I can say with certainty is that many in our community are at a breaking point. It is not an exaggeration to say that a crisis is looming. The outcome can be bad, or it can be worse.

The outcome will largely depend on all of you here in this room, those listening on the radio or watching on the internet, especially you, Senator and Assembly Member. you've both done a commendable job. I know you know there's a lot more work to do. My message tonight is simple: we don't have a moment to spare. Thank you again for the opportunity.


DOUG MCVAY: That was Hezekiah Allen, President of the California Growers Association. He was on a panel testifying at a joint hearing of the California State Senate’s Governance and Finance Committee and its Business, Professions and Economic Development Committee. That hearing was held in Ukiah, California, on March First. We’ll be back with more from that hearing in a moment.

You’re listening to Century of Lies, a production of the Drug Truth Network for the Pacifica Foundation Radio Network, on the web at DrugTruth.Net. I’m your host Doug McVay, editor of DrugWarFacts.org.

Coming up March 12 through 16, the UN’s Commission on Narcotic Drugs will be holding its Sixty-First Session in Vienna, Austria. The Commission was established by the UN’s Economic and Social Council in 1946 to assist the ECOSOC in supervising the application of the international drug control treaties. It’s also the governing body of the UN Office on Drugs and Crime.

Unlike other UN offices and agencies, there is no video or audio archive of the proceedings of the CND. They do provide a live webcast of the plenary meetings, but only a live webcast. I don’t have the funding available to go to Vienna this year, but I do make good strong coffee, so I’ll be staying up overnight the Twelfth through the Sixteenth of March in order to record the proceedings. I’ll bring you the best bits in upcoming editions of Century of Lies.

If you’re an insomniac or just interested in watching the CND meeting, you can find out more by going to the UNODC website at UNODC.org, looking on the left hand side of the page for Commissions, the following the links to find meetings of the Commission on Narcotic Drugs. You can also follow the CND by going to the CND Blog website, it’s at CNDBlog.org. That’s a site run by the folks at International Drug Policy Consortium. It’s an excellent resource which I highly recommend.

Now let’s get back to that joint hearing of the California State Senate’s Governance and Finance Committee and its Business, Professions and Economic Development Committee, looking at the first 60 days of Prop 64. After all the panelists finished giving their presentations, the legislators and panelists heard from the public.

RON EDWARDS: Ron, CK Nursery, Willits. A lot of issues that come up around the nursery side of it, really hasn't been approached very well, particularly the A and M, when we're dealing with a perishable product.

The other side of that is transportation. The requirements for nurseries with the cameras and stuff, I mentioned this to Chief Ajax today when I was in Sacramento, racing here, that we really need to make that work for the nurseries, possibly have a way of cultivators picking up product.

Track and trace. We really need your help here at the north coast. Our local governments feel that they're not getting the information that they need, so if there's anything that could be done to provide them with the detailed information so that we don't have to double enter. Right now, we're faced, to get our local government the information they need, we're working with two track and trace systems. That's just fraught for problems.

Also, one of the things I think is very clear, with Santa Barbara jumping so far ahead, is the CDFW [California Department of Fish and Wildlife]. The water requirements for the north coast.

That's really the frustration, it's frustrating that we're talking about that, but from the farmer's point of view, those are the areas that are really causing us the problems, and law enforcement uncertainties, we really aren't getting the participation from all of those people involved, and we need everybody coming forward to answer questions to make this successful. Thank you.

CA STATE SENATOR MIKE MCGUIRE: Thank you so much. I'm going to Ms. Ajax. We should have a -- we have a roving mic right over there. Ms. Ajax, if you don't mind addressing, thirty seconds, track and trace, about that double entry issue? And then the other item in regard to -- okeh, perfect.


She said hell no, I'm --


CA STATE SENATOR MIKE MCGUIRE: We're going to turn it over to Mister Parrott, who's excited. And then we're going to -- Mister Parrott, if you want to talk about the issue as well on nurseries, please fire away, sir.

RICHARD PARROTT: Trying to make -- is this on? So, with regard to the nurseries, I would ask for the, A, if, I'm not sure what the issue is with the A&M, but I would like to encourage the gentleman to contact our office, if you have or if it needs additional discussion, please touch base with me after this and I can give you my card and we can get set up to get some clarification.

With regard to track and trace, and the local track and trace systems, we will be talking with the counties about what information that is being required to be entered from the counties that is duplicative for the state system so you don't have to double enter things, but if there are things that are proprietary to the county and different than the state system, that's going to be something that the state doesn't really have a call over.

CA STATE SENATOR MIKE MCGUIRE: Thank you so much. Taylor is going to get your card, sir, right now, and we're going to make sure that Mister Parrott walks away with your card as well.

Welcome, sir, you have one minute and thank you for being here.

MARK: Yeah, thanks for having me. Mark, I'm a small farmer out of Comptche. I want to put a strong emphasis on my gratitude for the work that you all have accomplished, in the days prior to January First, and the 60 days that followed. Our county and state have come a long way in implementing a very complicated system.

I am here in Mendocino County, at this hearing, because in May, I would like to be planting my farm, during these historic times for cannabis becoming legitimate. In Mendocino County, we are nothing but small farmers.

Currently in Santa Barbara County there are more temporary state licenses issued than any other county. Their board of supervisors have allowed nearly 100 of the 250 licenses to be owned by one person.

Let me jump straight to my question: What happened to the CEQA [California Environmental Quality Act] review for Prop 64, and the EIR [Environmental Impact Report] recs to mitigate impacts through a one acre cap for the initial five years?

We want to show you that we are the people that are going to do the right thing, and we are ready to pay the taxes. The people stepping up here tonight are about community first. It is the only pathway to success. Please help. Give us a chance to keep the legacy of Mendocino County sustainable by doing the right thing. We want to work with you, because we are the part of the community that supports you. Thank you.

CA STATE SENATOR MIKE MCGUIRE: Thank you, Mark. Any comment from our panel, particularly on the issue of CEQA?


Cool, everybody's very excited again to answer questions. Well, I want to make sure this is a dialogue, so any items that, what Mark had said?


Great. We're going to go to our next speaker, but I just -- I just wanted to make sure we're having a little bit of dialogue here, right? So -- please.

CA STATE ASSEMBLY MEMBER JIM WOOD: I'm curious, and I'd like -- so, so, did I -- what I heard from the gentleman was that of the 250 licenses issued in Santa Barbara, one hundred went to one person? Is that correct? Eighty-seven went to one person? Is that correct?

RICHARD PARROTT: I'm not sure, but I'm assuming, if he pulled the information from our public website, that that is available to the public. So that, if that's the data he saw, that would be correct.

CA STATE SENATOR MIKE MCGUIRE: It is a huge loophole in the system that's hurting small family farmers here and throughout California. But, no, that's going to be an issue that we're going to be following up on as well. Thank you.

DOUG MCVAY: We’re listening to a joint public hearing of the California State Senate’s Governance and Finance Committee and its Business, Professions and Economic Development Committee, looking at the first 60 days of Prop 64. Next up is a friend of mine who was there, a good friend of the program, Doctor Amanda Reiman.

AMANDA REIMAN, PHD: Thank you. So, I'm Amanda, I'm with the International Cannabis Farmers Association, and we have one constituency, and those are farmers who grow out under the sun. So I'm here tonight with some suggestions on how to help them.

When considering how to create a level playing field for farmers, we need to consider a three dimensional model, because it's not just size, but it's also production cycles. Seasonal sungrown farmers and mixed-light one may be getting one to two cycles a year from their farm, while indoor and mixed-light two farmers in the same size are pulling five to six cycles a year, and that puts sungrown farmers at a disadvantage.

So the ICFA has a few suggestions. One is a production based tax incentive, like alcohol, where smaller producers are able to get a tax break for the first X amount of product that they move off of their farm.

Secondly, financial incentives for sustainable practices, like use of solar, water catchment, regenerative farming methods including closed loop systems, and polyculture farms that provide produce to the community.

Three, allow small farmers to vend directly to the public at events and farmers markets without a retail license. And four, if we want to address overproduction, support the small farmers and look at what the EIR recommended, and we should start the cap at capping production levels in indoor and mixed-light two facilities and see if we can address overproduction that way.

And finally, I want to voice support for AB2810, which would establish a statewide ag commission for sungrown cannabis, so that like walnuts, pork, and eggs, we can have a state agency that promotes sungrown cannabis as a superior growing method. Thank you very much for your time today.

CA STATE SENATOR MIKE MCGUIRE: Thank you, Amanda. Mister Parrott, anything on CDFA's side that you want to mention on this one?

RICHARD PARROTT: Just, those were good points that she had made regarding the, the size, the -- regarding the, the production cycles and those, and I know that the sizes of the licenses were put in statute, so those are things that I think are important for all of us to take into consideration here tonight, and I appreciate her comments on that.

CA STATE SENATOR MIKE MCGUIRE: Thank you. Let's go to Hezekiah.

HEZEKIAH ALLEN: Yeah, I did just want to note that those license sizes were put in statute, and it is important to note that indoor and mixed-light are half the size of outdoor, and so when we look at the application of the licensing framework that was passed, it does include that tiered approach, and so that was very much cooked into the policy.

To the concept of tiered taxation, I do want to remind everybody of Assembly Member Wood's great work with AB2243 in 2016, that outlined a very progressive tiered tax rate for cultivation to exactly the end of tiered tax rates.

And lastly, very important to mention, this year's legislation, AB2641, that Assembly Member Wood has introduced, which would allow for direct sales at events, and so, the two of you sitting here are undeniably leaders on these issues, and you are taking up a lot of those priority issues to begin with, and I encourage you to stay the course. It's a big state, you represent a tiny sliver of it, but, my goodness, this is life or death, make or break for us, so keep it up, guys.


DOUG MCVAY: That was Amanda Reiman, PhD, an academic and a researcher. She was speaking at a joint public hearing of the state senate’s Governance and Finance Committee and its Business, Professions and Economic Development Committee. The hearing was to examine the First Sixty Days of Prop 64.

And that’s all the time we have this week. I want to thank you for joining us. You have been listening to Century of Lies. We're a production of the Drug Truth Network for the Pacifica Foundation Radio Network, on the web at DrugTruth.net. I’m your host Doug McVay, editor of DrugWarFacts.org.

The executive producer of the Drug Truth Network is Dean Becker. Drug Truth Network programs are available via podcast, the URLs to subscribe are on the network home page at DrugTruth.net.

The Drug Truth Network is on Facebook, please give its page a like. Drug War Facts is on Facebook too, give its page a like and share it with friends. Remember: Knowledge is power. Follow me on Twitter, I'm @DougMcVay and of course also @DrugPolicyFacts.

We'll be back next week with thirty more minutes of news and information about the drug war and this century of lies. For now, for the Drug Truth Network, this is Doug McVay saying so long. So long!

DOUG MCVAY: For the Drug Truth Network, this is Doug McVay asking you to examine our policy of drug prohibition: the century of lies. Drug Truth Network programs archived at the James A. Baker III Institute for Public Policy.

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