Cannabis budget shortfall shored up

The budget shortfall, tallied by the Cannabis Division at more than $971,000 in total, comes primarily from overestimates of expected revenues for this year, especially in the area of expected permitting and licensing fees collected. Avid readers of The Journal will remember a budget hearing discussion back in September centered around Cannabis Division estimates for an expected $2.1 million in revenue from permitting fees and licenses, during which questions were raised about those estimates being too high, before the estimates were reduced by $1 million, and down to $1.1 million (The Trinity Journal, “County budget finalized,” Oct. 5, 2022).

Updated budget numbers supplied by the Cannabis Division at the March 21 supervisors meeting showed that up until then, less than $100,000 has been collected this fiscal year in cannabis permit fees. A revised budget was presented, with an estimate further reduced to only expecting $440,000 instead of $1.1 million by the end of the fiscal year, accounting for the lion’s share of the division’s current deficit.

Working off of the budget balanced back in September that had an initial $6 million deficit at the start of budget hearings, it is not as if the general fund has unallocated monies sitting around, save for a contingency fund with just over half a million dollars remaining for the entire county for the rest of the fiscal year.

In comes the Local Assistance and Tribal Consistency Fund. The fund is defined as a “general revenue enhancement program” which stems from the $2 billion federal American Rescue Plan. Trinity County received $4.8 million in total from the fund, which was announced back in January (The Trinity Journal, “$4.8 million in new county funding found,” Jan. 11).

Any money moved now from the general fund, Senior Financial Analyst Suzie Hawkins explained, ultimately will come from this new source of funding.

In defense of the deficit

Cannabis Division Director Drew Plebani first presented several bullet point findings on behalf of the division, painting the current deficit as only temporary and showing past significant contributions from the division to the county.

• The amount of money the county cannabis program has contributed to the general fund through code enforcement for cannabis related fines — $3.1 million in 4.5 years — is more than the current budget shortfall;
• No contribution or advance from the general fund will be required next year;
• $1.6 million has been contributed from the cannabis program to the general plan update;
• $305,000 in cannabis taxes have been contributed to the general fund over the past 2.5 years;
• Cannabis tax revenues are expected to grow, and to-date, the cannabis program has had a net positive financial impact on the county.

Plebani also mentioned the first Trinity County cannabis storefront retail businesses whose licenses have already gone out and are expected to contribute to tax revenues soon, and hopes to have as many as 520 cultivation licenses approved in the next few years.

Contribution, or advance?

Four recommendations were also presented by Director Plebani as options for meeting the deficit. The options included having the deficit covered entirely by the general fund, giving the Cannabis Division an advance on future funds to be paid back later, selling Cannabis Division real estate or different combinations of these options to reach the $971,000 threshold.  

The first option consisted of selling (to another county department) the Cannabis Division’s building on Main Street, the old Scott’s Valley Bank, estimated at $450,000, with the remaining $520,000 as an advance from the general fund to be paid back over five years. Option two was the same except for the general fund advance being a contribution instead. Option three and four removed the building from the equation, and the total amount would come as an advance for option three or a contribution from the general fund as option four.

Public comment followed with nearly all speakers in favor of a direct contribution, option four, rather than an advance to be paid back, with most of those echoing the contributions of the cannabis program to the county.

Adrien Keys said the cannabis program has “paid its way wholly” including all studies and paperwork, and that it is “quite clear that the program is beneficial to the county.”

Dana Scott said she would choose option four, and that she has heard a lot of misinformation spreading about cannabis costing the county money, which is not true, “our program has provided money to the county and funded code enforcement, not cost the county,” she said.

Jake Grossman-Crist noted the value cannabis has brought to the community’s economy as a whole and urged supervisors to “get this program what it needs to let it continue building a viable economy in Trinity County.”

Carl Wompler advocated for the contribution option also.

“We paid enough into the county that we’re due,” Wompler said. “We need your help now.”

Ryan Tarbell said that there are still hundreds of small business farms out there waiting to get permitted again after the TAA lawsuit ended provisional licenses, “and any reduction in the budget of the cannabis department at this point would make these businesses suffer and many of them probably won’t get their licenses back this year.” He said that the cannabis program has already contributed greatly to the general fund over the years, and the county should contribute back so that the relationship can continue.

Trinity County Treasurer Terri McBrayer spoke during public comment as one of the few voices of dissent, stating that this is a huge sum of money to come from the general fund when all county departments have their own needs, but are forced to stay within budget.

“We can’t get the things that we need,” McBrayer said. “I would ask that you not choose option four, because I do not think that’s in the benefit of everyone, and this is supporting only one industry … this is not the only industry that is suffering.”

Tyler Thompson was somewhat ambivalent about how the funding be provided, “fund the department in some way shape or form,” he said, but added that he would like to see some goodwill returned from the county.

Jennifer Hill advocated for option four as well, “Maybe it’s time to give back to a program that has been so greatly contributing to our county,” and thanked the current Cannabis Division staff for their work.

Former District 1 Sup. Keith Groves said that cannabis ordinances which are coming up for review can streamline a lot of processes and add license stacking which could save the program hundreds of thousands of dollars a year and help get licenses out faster, bringing in even more revenue. Groves also said that however the deficit is funded, it is most important that it is funded and the program continues.

Steve Lyon said the county has been using the cannabis program as a cash-cow up until this year, only because of the TAA lawsuit.

“I think the county should prop up the program during this shortfall, get the program returning to positive finances,” Lyon said. “Choose option four and support the program.”

Karla Avila said the money should come from the general fund, and that any other year but this year — thanks to the TAA lawsuit — the money would have been there.

“If our hands aren’t tied behind our backs, there is room to grow,” Avila said.

Veronica Kelley-Albeiz was the only other dissenting voice, echoing Treasurer McBrayer asking if the county has this money to spare, and questioned future revenue estimates. She recommended option one, selling the Cannabis Division building and paying back the rest over time as an advance.

Chriss Williams said the funding should be a contribution if supervisors are serious about economic development in the county.

John Brower said the cannabis program has “contributed mightily to the county since its inception,” and that previous contributions from the industry have bailed out the county during other county financial emergencies in the past. He suggested the county reciprocate in the form of a contribution rather than selling their building or having to pay the amount back.

Interim Deputy Director of Planning Ed Prestley also reminded supervisors the options are only recommendations, and they could respond to the deficit however they see fit or make their own options, which they eventually did.

Contribution, and advance

Supervisors ultimately went with their own hybrid option somewhere between option three and four, deciding by unanimous vote to fund $450,000 as a contribution from the general fund, and the remaining $520,000 and change as an advance to be paid back over five years.

The motion which passed was made as a subsequent motion by Sup. Dan Frasier, seconded by Sup. Ric Leutwyler. Other motions that were on the table included a motion for option four, a full contribution from the general fund made by Sup. Liam Gogan, and Sup. Leutwyler had made a motion for the first option of selling the Cannabis Division building and funding the rest through an advance.

When making his motion, Sup. Frasier said he saw no point in moving around fixed county assets like a building and that doing so would come with additional unnecessary costs like paying for a fair market value appraisal and staff time and effort for paperwork and filing the transfer.