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Regular-General Government # 27.
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| Board of Supervisors |
County Administrator |
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| Subject |
| Receive update on the status of the cannabis program fee structure and costs associated with enforcement activities for illegal grows. (No general fund impact) (Blacklock/Strachan) |
| Recommended Action |
| Receive update on the status of the cannabis program fee structure and costs associated with enforcement activities for illegal grows. |
| Strategic Plan Goal(s) |
Safe Communities
Sustainable Environment
Flourishing Agriculture |
| Reason for Recommended Action/Background |
MEDICAL CANNABIS CULTIVATION FEES
On November 22, 2016, the Board approved five fees to cover the costs associated with implementation of the medical cannabis cultivation interim ordinance. The fees for the cannabis program were designed to recover the cost of administering and enforcing the interim ordinance. The program fees adopted in November 2016 were based on estimated costs and staff time, and incorporated the experience of the County’s medical cannabis cultivation task force at that time. Cost models were also used to determine fees.
Additional fees were approved by the Board on June 27, 2017 for the operation of the Track and Trace program and laboratory testing of the medical cannabis cultivated in the County. These fees will be charged to and collected from cultivators and passed through to the Track and Trace and laboratory testing vendors SICPA Product Security, LLP (SICPA) and Steep Hill Labs, respectively. The fees adopted in June 2017 were provided by SICPA Product Security LLP, the operator of the County’s Track and Trace Program, and Steep Hill Labs, Inc. which does the cannabis laboratory testing.
Staff has prepared a fee analysis for Fiscal Year 2017-18, which provides the revenue based on fees collected and expenditures and encumbrances from July 1, 2017 through December 31, 2017. The analysis also includes the projected revenues and expenses and encumbrances for the second half of the fiscal year, January 1, 2018 through June 30, 2018.
Table 1, which is included in Attachment A, summarizes the actual and projected revenues and expenses and encumbrances for Fiscal Year 2017-18. Table 1 demonstrates that the current fee schedule is appropriate for the costs associated with the implementation of the cannabis program at this time. The program has changed throughout its inception and the fees have covered the costs associated with the program modifications. These modifications include, for example, additional staff responsibilities associated with implementation of the interim ordinance as amended by the Board in November 2017 and staff time associated with the development of the comprehensive land use regulations. Moving forward, additional staffing costs will be incurred with the early implementation development agreements, but such costs will be reimbursed directly by applicants for such agreements.
Projected Revenues January 1 – June 30, 2018
The projected revenue for the second half of Fiscal Year 17-18 assumes collection of annual certification fees commensurate with revenues that were collected in the first half of the fiscal year. This projection assumes that the number of license holders and total cultivation canopy will remain largely the same. It is anticipated that by the end of March, staff will know the number of licenses which have been renewed for 2018 and the anticipated size of canopy for determining the Annual Certification/Inspection Fee. Once these amounts are known, a cannabis program budget will be developed for Fiscal Year 18-19 and presented to the Board.
Expenditures Not Yet Billed & Projected Expenditures for the period January 1 – June 30, 2018
The expenses in this category reflect staffing costs which have not yet been billed to the program; a Department of Agriculture position for the Cannabis Task Force not yet filled and anticipated expenses for the remainder of the fiscal year. Staffing costs from all departments working on the cannabis program are tracked and billed to the program. While all time spent working on the program is tracked, staff costs are not always billed on a timely basis. As a result, costs reflected in the first half of the fiscal year are lower than what have actually been incurred. The additional anticipated costs included in the table are projected based on the staff time that has already been recorded and/or budgeted.
The program expenses in Table 1 (Attachment A) which have been encumbered but not yet billed to the program or are anticipated over the next six months are detailed in Table 2, which is included as Attachment B. Many of the costs detailed in Table 2 have been incurred but not yet billed to the program. However, it is anticipated that they will be billed by the end of the fiscal year. Also reflected are costs which are anticipated to be incurred by the program. For example, the development of the comprehensive land use regulations will require the development of a programmatic Environmental Impact Report (EIR), in compliance with the California Environmental Quality Act. Staff has provided an estimate for this expense, which will be refined as part of the selection of an EIR consultant.
Litigation Reserve
Given the changes to the cannabis program, more time is necessary to determine what changes to the fees should be made in the future. However, staff does recommend that a litigation reserve be established to cover any required litigation fees.
Enforcement of Illegal Grows
The 2017-18 Adopted Budget included $361,965 in General Fund support for enforcement of illegal (non-licensed) cannabis cultivation activities, including two new Deputy Sheriff positions and two patrol vehicles, and other miscellaneous costs. These enforcement costs cannot be funded with cannabis cultivation regulatory fees, which are limited to funding activities connected with the licensed cultivators. However, it is anticipated that costs related to illegal enforcement will be partially offset by enforcement fees and administrative penalties.
Staff is continuing to work with the Sheriff’s Office to determine current-year costs related to enforcement of illegal cannabis cultivation and will provide a report to the Board once the cost information is available. The District Attorney’s Office has indicated that any costs related to illegal cultivation will be funded by settlement revenues. |
| Collaborations (including Board advisory groups and external partner agencies) |
| County Administrator's Office, County Counsel, Department of Financial Services, Agriculture Department |
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