Former cannabis growers and an advocate for commercial cultivation say local sales taxes are down in Calaveras County since a ban forced hundreds of pot farmers to shut down their businesses earlier this year.
They insist the ban on commercial cultivation of cannabis, approved by a split Board of Supervisors vote, 3-2 in January, is the direct cause of sales tax decreases this year.
But the county administrative officer has reviewed the same data examined by growers and disputes their claim that the numbers show the county is either already in recession or is headed for one.
“Clearly in quarter 1 of the 2018 calendar year there was a decline in sales tax,” Lutz said. “I show a 4 percent decrease for just the county’s portion. In quarter 2 of 2018, I am showing a steep decline of 29 percent, which is very concerning. Comparing just July 2017 to July 2018, I show a 6 percent decline over prior year, so the steep decline may have been a one-time large dip.”
One of the supervisors who voted for the current ban, Dennis Mills of District 4, says the growers’ claims are self-serving and ignore significant impacts of the 2015 Butte Fire on the Calaveras County economy.
What growers say
Prapanna Smith, owner of a formerly licensed indoor grow operation called Magic Show LLC in the Hathaway Pines-Avery area, said on social media this week, “The Ban Slam: State Numbers Reveal a Damaged Calaveras Economy!”
Smith and David K. Sweet, an advocate for cannabis, say they accessed data this week from the California Department of Tax and Fee Administration that shows a drastic drop in sales tax allocations in Calaveras County immediately following the county ban on commercial cannabis cultivation.
Smith, Sweet and Trevor Wittke, another grower who is also executive director for the Calaveras Cannabis Alliance, say they examined quarterly sales tax figures from 2015 to the present, and the data shows sales tax increases while regulation of commercial cultivation was in place in 2016 and 2017, and declines the first two quarters of 2018 once the Board of Supervisors approved the ban.
Smith, asked Friday how he knows the ban is responsible for the sales tax reductions, and for specific proof, responded, “Because the data fits the timetable of decisions made by the board of supervisors like a glove. It is because sales tax is a direct measurement of economic activity.”
In the 2nd quarter of 2016, Smith said, the numbers show a 14 percent increase and a 12 percent increase in the 3rd quarter of 2016. An urgency ordinance allowing commercial cannabis cultivation was in effect in 2016 and 2017.
“Then in January 2018 they pass the ban and the 1st quarter sales taxes go down to minus 3 percent, and the 2nd quarter is negative 23 percent,” Smith said. “This year wiped out two years of gains.”
Wttke said he believes the data shows that local business have lost more than $23.4 million in retail sales through June of this year, relative to last year. He says the data shows what growers and commercial cannabis advocates knew would happen.
Regulation created an artificial economy in Calaveras County, Wittke said, adding that sales tax decreases are no surprise to anyone in the local cannabis industry or anyone else who has paid attention to the ongoing cannabis debate.
“The numbers are stark,” Wittke said. “If the trend line holds throughout the year Calaveras County businesses will lose over $47 million representing an 18.52 percent retraction in the local economy compared to 2017.”
County administration view
Lutz, the county administrative officer, says he has seen the data analysis put together by Smith and Sweet, and he has reviewed it against his own analysis of the same data.
Lutz noted that the data represents an aggregate across the county, so it includes businesses in unincorporated parts of the county as well as within Angels Camp city limits.
Lutz also talked to Smith this week about the commercial cultivation advocates initial use of 3rd quarter 2018 data, which Lutz said is incorrect. In a phone interview Thursday, Lutz said that from an economics standpoint the situation in Calaveras County does not equate to a recession.
“A recession is tied to unemployment,” Lutz said. “Our most recent numbers showed low unemployment, that the county is at historic lows in unemployment. Sales tax is not by economic definition a metric that indicates a recession.”
Later Thursday, Lutz provided a comparison of Calaveras County and California unemployment rates from the year 2000 to the 2nd quarter of 2018. It shows the most recent unemployment rate for the county at 3.8 percent, and the state at 4 percent. The county’s 3.8 percent unemployment rate is its lowest since 2000, when it was 4.9 percent. Unemployment peaked at 14.4 percent in Calaveras County in 2010.
Lutz acknowledged that sales tax decreases can be an early indicator of trouble, and he said he will be watching closely for 3rd quarter numbers expected by mid-to-late November.
“When you’re looking at the 2nd quarter this year, sales tax about 29 percent down, that’s steep,” Lutz said. “I want to see the 3rd quarter numbers to see if the trend continues.”
Bill McManus, chairman of the Committee to Ban Commercial Cultivation of Marijuana in Calaveras County, said the premise that the ban has any connection with reduced sales tax revenue is incorrect.
“I believe that the reduction in sales tax revenue is more closely tied to lack of compliance with existing state law and not a local ordinance banning commercial cultivation of pot,” McManus said. “It is obvious that the ban is not absolute and pirate grows continue under the ban as before with the urgency ordinance. If growers simply complied with existing state law, there should be an increase in sales tax revenue.”
Mills, the 4th district supervisor who voted for the ban in January, said the abuse of economic data to make political points is so common it’s legendary.
“Any data must be put into context,” Mills said Friday. “The assertion, that banning pot cultivation is responsible for a decrease in sales tax revenue, is absurd and totally misleading.”
Smith, Sweet and Wittke assert Calaveras County sales taxes are down but that does not explain why local property values are up, or why excise taxes on gasoline, tobacco, alcohol and cell phones are up, Mills said.
“Comparing pre-Butte Fire 2015 sales tax revenue to 2018, we’re talking about a decrease in sales tax revenue of about $7,000 a month,” Mills said. “The growers say the ban caused the sales tax reductions but they don’t take into account the Butte Fire victims and other factors.”
The Butte Fire burned about 10 percent of Calaveras County and it resulted in property losses totaling hundreds of millions of dollars and two deaths, Mills said. So in 2016 and 2017, during the urgency ordinance period, was when many of these properties were rebuilt, and people were coming from all over the U.S. to cut down trees, fix roads and clear hazardous material from burned properties. Reconstruction generated much of the sales tax revenue in 2017 and 2017.
In addition, motel occupancy rates are up, forest management projects are underway, and “the reality is that our economy is doing great with a $741,000 increase in property tax revenue over last year as recently reported by our assessor which equates to an increase of $61,750 per month and a $440 million increase in assessed value over last year,” Mills said. “We do not need money from marijuana farms to make this county economically successful.”
The ban was approved Jan. 10 by Gary Tofanelli, District 1 supervisor, Clyde Clapp, District 5, and Mills, with Jack Garamendi, District 2, and Mike Oliveira, District 3, opposed.
Sweet disputed Lutz’s definitions of a recession and emphasized Calaveras County has just come through two successive quarters of negative economic growth, which equates to a recession.
“He can't change the definition of a recession to suit his purposes,” Sweet said. “You can't look at the data and conclude anything other than we are already in the midst of a local small business recession. The question is what other than a sudden loss of 1,000 jobs and farms and businesses could account for a decline in the local economy while the rest of the state and the country are booming?”
Contact Guy McCarthy at email@example.com or 588-4585. Follow him on Twitter at @GuyMcCarthy.