Memorandum
Date: August 27, 2024
To: The Honorable Lake County Board of Supervisors
From: Bruno Sabatier, District 2 Supervisor
Subject: Consideration of Resolution To Extend Temporary Reduction of the Cannabis Cultivation Tax Rate, Extend Temporarily Limiting Cultivation Tax to Canopy Area Through 2025, and Rescind the Suspension of Tax Rate Increases Pursuant to the Consumer Price Index
Executive Summary:
As you may be aware, the Board of Supervisors took action on February 1, 2022 & April 19, 2022 by passing Resolutions 2022-15 & 2022-45. Resolution 2022-15 temporarily suspended the tax rate increase pursuant to the consumer price index through 2023. Resolution 2022-45 temporarily reduced the cannabis cultivation tax rate for 2021 and 2022 by 50% and temporarily limited the cultivation tax to the canopy area for 2022 and 2023. On April 11, 2023, the Board of Supervisors passed Resolution 2023-43 amending the aforementioned resolutions extending them through the end of 2024.
These reductions were due to the dramatic decrease in the cannabis market. According to the Lake County Cannabis Alliance, the price per pound of cultivated outdoor cannabis reached a high of $1200 2020 dropping to a low of $200 in 2021 and in 2024 hovering under $400. While it would appear that there have been some gains as of late, there is still a possibility of the price per pound going down again as the market continues to stabilize.
The resolution before the Board allows all prior resolutions to expire and rescinds those resolutions at the end of the year, December 31, 2024. It also allows the consumer price index increase to be reinitiated starting January 1, 2025 for the 2025 cultivation year and for all future years. Since the price per pound has increased, rescinding some aspects of the reductions that the Board of Supervisors has afforded our local growers since 2022 helps get us back towards where we started in tax collection, based on Measure C. While the market may have not completely settled, enough respite has been given to cultivators in Lake County that slowly rescinding some of these tax breaks should be on the table.
The resolution does offer to extend continuing to tax canopy rather than cultivation area and to keep the 50% reduction based on the original amount prior to the April 19, 2022 resolution. Below is the amount of cannabis taxes collected by year.
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2017-18 |
2018-19 |
2019-2020 |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
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Recommended Action: Adopt Resolution To Extend Temporary Reduction of the Cannabis Cultivation Tax Rate, Extend Temporarily Limiting Cultivation Tax to Canopy Area Through 2025, and Rescind the Suspension of Tax Rate Increases Pursuant to the Consumer Price Index