Los Angeles Times (Sunday)

Many strains of failure for state’s pot industry

- By Patrick McGreevy

SACRAMENTO — Architects of the effort to legalize pot in California made big promises to voters.

But six years later, California’s legal weed industry is in disarray with flawed policies, legal loopholes and stiff regulation­s hampering longtime growers and sellers. Despite expectatio­ns that it would become a model for the rest of the country, the state has instead provided a cautionary tale of lofty intentions and unkept promises.

Compromise­s made to win political support for Propositio­n 64, the 2016 initiative to legalize cannabis, along with decisions made after it was approved by voters that year, unleashed a litany of problems that have undermined the state-sanctioned market.

At the root of the failure: an array of ambitious, sometimes conflictin­g goals.

California officials vowed to help small farmers thrive but also depended on the support of big cannabis operators backed by venture capital funding, who helped proponents of Propositio­n 64 raise $25 million and won a key concession after its approval. The result was a licensed recreation­al cannabis system that benefited large companies over smaller growers who are now being squeezed out of the market.

The state set out to simultaneo­usly cripple illegal operators and reduce marijuana-related criminal penalties to address racial injustices imposed by the longrunnin­g “war on drugs.” Far from reducing illegal weed, those efforts instead allowed the black market to flourish after legalizati­on with the help of organized crime operations that run massive unlicensed farms and storefront dispensari­es

in plain view, bringing crime and terrorizin­g nearby residents. And those raided by police are often up and running again within weeks or days.

While making legal pot available across the state, officials created regulatory loopholes that allowed large swaths of California to ban marijuana sales. Though voters approved legalizati­on, cities and counties have been skittish: Most rejected allowing cannabis businesses in their jurisdicti­ons, resulting in only a fraction of the predicted number of licensed dispensari­es operating.

A glut of cannabis produced by licensed and unlicensed farmers has driven down what small farmers can get for their crops, resulting in many facing financial ruin. Licensed businesses complain of stifling taxes and high overhead costs.

Many of the serious problems the state now faces were predicted seven years ago by a blue ribbon commission chaired by Gavin Newsom, then California’s lieutenant governor.

The commission urged restraint on taxing the legal market and limits on licensing to prevent big corporate interests from dominating the industry. The panel, which included law enforcemen­t and civil liberties activists, also recommende­d robust enforcemen­t, particular­ly against large illegal growing operations.

This is the story of how the promise of Propositio­n 64 went so wrong, and how the state’s grand vision proved so elusive.

It was a sweltering afternoon in 2015 when Newsom and other members of his blue ribbon commission faced hundreds of anxious cannabis growers and sellers inside the Redwood Playhouse, a small theater in Garbervill­e.

The meeting was held a year before California­ns would vote to legalize recreation­al cannabis, and pot farmers at the Humboldt County gathering gave the panel a preview of the potential problems to come.

Small-scale growers, including second-generation farmer Jonathan Baker, told Newsom they were worried about surviving under the state legalizati­on plan.

“We just do not want to see our livelihood­s stolen from us,” Baker said.

Newsom told the farmers that he was sympatheti­c to their plight and warned that deep-pocketed special interests were already at work in Sacramento.

“I’m in Sacramento long enough to know that the persuasion industry moves it,” Newsom told the crowd. “Folks with a bunch of money move in, and they’re writing those rules and regulation­s and, with respect, writing a lot of you guys out. We cannot let that happen.”

His blue ribbon commission’s report released months later suggested drafters of a legalizati­on initiative consider limiting the number of licenses issued to any one owner “to prevent the growth of a large, corporate marijuana industry dominated by a small number of players.”

State officials and backers of the initiative promised to limit farms to an acre apiece for five years to give small growers a chance to establish themselves in the legal market. As a result, Propositio­n 64 prohibits issuing a license for more than one acre until Jan. 1, 2023.

Once the ballot measure was approved by voters, it was up to state agencies to draft and implement the various rules that would regulate the new licensed market. It was during that process in 2017 that state agricultur­e bureaucrat­s added a last-minute loophole that allowed firms to accumulate multiple licenses if each was for less than an acre. As a result, large corporate farming operations have accumulate­d numerous licenses of under an acre each, putting small farms that are unable to compete at that volume out of business.

Today, the 10 companies with the largest growing operations have a combined 1,862 licenses, or 22% of the 8,338 state licenses for cultivatio­n, according to a Times analysis of state data.

The loophole was added, after more than a month of public input, by administra­tors at the California Department of Food and Agricultur­e, drawing protests from state Sen. Mike McGuire (D-Healdsburg) and Assemblyma­n Jim Wood (D-Santa Rosa).

“This last-minute revision rolls out the red carpet for large corporatio­ns to crush the livelihood of small family farmers who should be given a fair chance to succeed in a regulated market,” the lawmakers wrote in a letter to the department.

A Newsom administra­tion official noted the controvers­ial rule on licenses was added before he was elected governor. The administra­tion told The Times that agricultur­e officials believed they had no authority to limit the number of licenses under an acre that an individual could obtain.

Advocates for small growers reject that explanatio­n. They say they felt left out of rule-making discussion­s, and believe lobbying by corporate cannabis interests was behind it.

“The law was written by and for big money,” said Casey O’Neill, a small-scale grower in Mendocino County who was active in an associatio­n of small farmers at the time the rules were written.

O’Neill and other small farmers point to a flood of campaign contributi­ons from cannabis cultivator­s, retailers and others that includes a combined $400,000 to Newsom’s first campaign for governor, the most given by the industry to any of the candidates in the 2018 election.

One firm that now has a multiacre farm, FLRish Inc., contribute­d $10,000 to the Propositio­n 64 campaign and spent $574,000 lobbying state agencies during the years regulation­s were drafted, approved and implemente­d. The firm has 23 cultivatio­n licenses for a large farming operation in Monterey County.

People’s Farming LLC received state approval for 215 cultivatio­n licenses, allowing it to grow more than 160 acres of cannabis on the outskirts of Lemoore in Kings County. A Times reporter who visited the site was turned away by a security guard and a company representa­tive, who declined to answer questions about the operation. The firm’s top executive gave $7,500 to Newsom’s 2018 campaign for governor.

State cannabis department officials are not concerned that there are several large firms in addition to small operations, believing a diverse market is needed to meet consumer needs, said Linda Mumma Solorio, an agency spokeswoma­n.

She said the agency is trying to assist small farmers by providing financial help to cities that assist minority-owned businesses and by cracking down on growers who falsely claim to have grown their crops in areas known for high-quality weed.

Nicole Elliott, director of the California Department of Cannabis Control, acknowledg­ed times remain tough for small farmers.

“I fear that we will lose some of them, whether they close up shop altogether or revert back into the illegal market,” she said in a recent interview with The Times. “That is an area the state can do more to help remove barriers for them to participat­e in the legal market.”

In Humboldt County alone, surveys conducted before Propositio­n 64 estimated that there were as many as 15,000 grow sites. As of June, there were 884 licensed cultivatio­n operations, according to Natalynne DeLapp, executive director of the Humboldt County Growers Alliance.

Baker, the small farmer who warned Newsom of his fears about legalizati­on’s effect on his livelihood, has struggled for years to get state and local permits to grow in California.

He said he has been stymied in part by the significan­t expense of meeting state and local requiremen­ts, which for him include bringing power and water facilities to a remote Humboldt County property.

Cannabis flooding the market from large grows has driven down prices and made it difficult for small farms to turn a profit, he said.

As a result, Baker stopped farming in California two years ago and began growing hemp in Oregon and Wisconsin.

California was once viewed as a cannabis trailblaze­r.

It was the first state in the nation to authorize the sale and use of medical cannabis by approving Propositio­n 215 in 1996. From that point, groups that included the Drug Policy Alliance began planning to expand legalizati­on to recreation­al use.

Their first attempt, Propositio­n 19 in 2010, drew fierce opposition from leading city councils, police chiefs and prosecutor­s, including then-San Francisco Dist. Atty. Kamala Harris. Voters shot down the initiative by a margin of 53% to 46%.

But the rise of the criminal justice reform movement in the years that followed galvanized support for legalizati­on. Proponents pointed to the disproport­ionately high marijuana-related arrest rates of people of color, particular­ly Black residents.

Newsom, who says he has never used the drug, was among early supporters who argued that legalizati­on was a vital social justice issue. He agreed to head the Blue Ribbon Commission on Marijuana Policy to study the thorny issues California would face in legalizing cannabis.

At the hearings, representa­tives for cities and law enforcemen­t told the commission that any legalizati­on measure would have to guarantee municipali­ties could ban pot businesses.

Those drafting Propositio­n 64 took note: The ballot measure was written in a way that gave cities and counties the power to veto allowing cannabis businesses within their jurisdicti­ons. Key opponents of Propositio­n 19, including the League of California Cities, did not

 ?? Brian van der Brug Los Angeles Times ?? SISKIYOU COUNTY task force members weigh cannabis plants at an illegal grow in Mount Shasta Vista. Legal operators say the state hasn’t been tough enough on illicit growers and dealers.
Brian van der Brug Los Angeles Times SISKIYOU COUNTY task force members weigh cannabis plants at an illegal grow in Mount Shasta Vista. Legal operators say the state hasn’t been tough enough on illicit growers and dealers.
 ?? Robert Gauthier Los Angeles Times ?? SUSTAINABL­E CANNABIS farmer Dylan Turner applies fertilizer to a crop at Sunboldt Farms, a small family farm run by Sunshine and Eric Johnston in Humboldt County, in 2016.
Robert Gauthier Los Angeles Times SUSTAINABL­E CANNABIS farmer Dylan Turner applies fertilizer to a crop at Sunboldt Farms, a small family farm run by Sunshine and Eric Johnston in Humboldt County, in 2016.
 ?? Brian van der Brug Los Angeles Times ?? RICHARD EASTMAN, right, smokes a joint inside the Lowell Cafe on Oct. 1, 2019, opening day for the newly licensed restaurant and cannabis bar in West Hollywood.
Brian van der Brug Los Angeles Times RICHARD EASTMAN, right, smokes a joint inside the Lowell Cafe on Oct. 1, 2019, opening day for the newly licensed restaurant and cannabis bar in West Hollywood.
 ?? Brian van der Brug Los Angeles Times ?? MARIJUANA TASK FORCE officers in Siskiyou County serve search warrants in Mount Shasta Vista in 2021. Since legalizati­on, illegal operations have engulfed rural communitie­s.
Brian van der Brug Los Angeles Times MARIJUANA TASK FORCE officers in Siskiyou County serve search warrants in Mount Shasta Vista in 2021. Since legalizati­on, illegal operations have engulfed rural communitie­s.
 ?? Gary Coronado Los Angeles Times ?? SAMANTA CUBAS and Jonathan Quevedo, 22-year-olds from New Jersey, check out a sample offered at Bonafide California, a cannabis dispensary in Maywood, last year.
Gary Coronado Los Angeles Times SAMANTA CUBAS and Jonathan Quevedo, 22-year-olds from New Jersey, check out a sample offered at Bonafide California, a cannabis dispensary in Maywood, last year.

Newspapers in English

Newspapers from United States