The Monterey County Civil Grand Jury has released a scathing report outlining multiple examples of regulatory dysfunction in the county’s cannabis industry oversight, accounting and economic tracking.

The recently released report, entitled “Monterey County’s Cannabis Industry Up in Smoke,” lambastes the county for lapses in transparency, organization and analysis of its cannabis industry, which produces the fourth-most legal cannabis of any county in the state. Cannabis is the county’s third-largest crop and is the second-largest generator of discretionary revenue in the county.

The civil grand jury described having to go through a “maze” of different reports in different locations and still not finding all the information sought about cannabis taxes, grows, money spent, and forecasts for upcoming years.

“Gaining a thorough understanding of one year of cannabis spending requires searching through at least a half dozen county sources for information and reports. Still, some questions remain unanswered,” the jury found.

Monterey County produced $484 million in cannabis products in 2021, the report states. $20.4 million in taxes from that were placed into the county’s general fund and that revenue totals $69.7 million since the inception of the county’s cannabis tax fund.

The civil grand jury also found no clear, consistent process for how discretionary money requests from cash collected through cannabis go before the Board of Supervisors, which ultimately decides how it is spent. The jury suggested that it appears to be a “squeaky wheel” process in which a group or agency “manages to get the attention” of a supervisor.

Economic management lacking

One of the factors the jury found that contributes to the poor cannabis oversight in the county was that during the first five years of the industry, the county had no economic development manager. A person was hired in November of last year to the position.

“We would expect the economic development manager to answer these questions, since cannabis production has been touted as one of the most significant economic development projects in unincorporated Monterey County,” the report reads.

The grand jury offered some interesting history about farming in Monterey County and how cannabis replaced a once-thriving cut flower industry gutted by the North American Free Trade Agreement, or NAFTA.

Some of the problems examined by the jury are not specific to Monterey County, such as the rise of the black market, fluctuating prices and demand, and taxes on growers, processors and retailers that some describe as “crippling.”

“We would expect the economic development manager to answer these questions, since cannabis production has been touted as one of the most significant economic development projects in unincorporated Monterey County.”

Civil grand jury report

Some specific findings from the report are as follows:

• The price of cannabis product dropped from $1,600 per pound in 2020 to under $500 per pound in 2021 due to a glut in the state’s cannabis supply.

• Even though there is a glut of product statewide, Monterey County has continued to actively process a nine-fold increase of provisional licenses on top of the active licenses. There is currently no cap on the number of licenses the county can approve.

• Consumers in the county pay state sales and excise taxes and county or city sales taxes which have resulted in a four-fold increase in consumer price compared to the black market.

• Many local industry inspections do not operate in a consistent manner or with a standardized checklist.

• Allocation and spending from the Cannabis Tax/Assignment Fund (CTF) is “difficult” to track.

Better reporting sought

The grand jury offered recommendations, such as an annual, comprehensive report detailing all cannabis revenues, including allocations and reserves. The report should include a breakdown of budget and distributions to community service agencies and an accounting of all full-time employees funded by the Cannabis Tax Fund (CTF).

This report should be implemented by Dec. 31, the jury recommended. The county is also advised to be more transparent by revising its cannabis program webpage to include easy-to-follow directions for assessing revenues and expenditures, also to be implemented by the end of the year.

The civil grand jury is also suggesting that the new economic development manager complete a study on new jobs created by the cannabis industry and its impact on the local economy. This should be completed by June of next year, they said.

“The haste in launching legal cannabis production has left lapses in transparency, oversight and analysis that need to be addressed,” the jury concluded. “There is no comprehensive, consistent reporting on the entire county cannabis tax revenue and spending.”