California’s attorney general says the cost of doing business in the state’s legal marijuana marketplace is too steep, pointing to high taxes and compliance hurdles that can create incentives for entrepreneurs to remain in the illicit market.
“The barriers to entry are too high,” state Attorney General Rob Bonta (D) said at an event in Fresno on Tuesday. “The costs to stay in operation are too high. And we should be lowering taxes at least temporarily.”
For operators trying to comply with state law, he continued, “We should make the regulatory burden less than what it is while we target the illicit market that is undercutting them.”
Bonta’s comments came as he announced a new program to aid cities and counties in addressing illegal marijuana activity through administrative enforcement and nuisance abatement. For too long, he said, fly-by-night operators in the state have gotten away with it.
“Some folks believe they can avoid the tax burden or regulatory burden and just operate and make a profit without being legal,” Bonta said at the event. “And they’ve been doing it. They haven’t been shut down. They haven’t had an administrative action taken against them. And that’s what is necessary, and that’s why this will be an important tool.”
Fresno is the first California city to participate in the California Department of Justice’s (CADOJ) Cannabis Administrative Prosecutor Program (CAPP), which provides local jurisdictions with CADOJ legal support to pursue the administrative actions.
“This innovative new program allows my office to better support local governments in our collective efforts to tackle illegal cannabis activities,” Bonta said in a press release about CAPP, “and we are confident that this new cost-effective program will have dramatic and measurable effects.”
If cited, the release continues, “illegal operators will have an opportunity to voluntarily shut down their operation, or face the eradication of unlicensed commercial cannabis cultivation or the cessation of unlicensed retail or manufacturing activity, as well as an order authorizing the recovery of enforcement costs.”
The program will provide attorneys to pursue administrative sanctions before local authorities “and, where necessary, assist with the development of procedures for expedited administrative enforcement,” his office said. If necessary, CADOJ may also “perform the administrative work necessary to provide notices, including assisting in facilitating administrative procedures, and assisting with logistical issues through the use of private process servers, contract code compliance officers, and abatement contractors.”
We’re partnering with the @CityofFresno to tackle unlicensed, illegal commercial cannabis activities by providing legal support through DOJ’s new Cannabis Administrative Prosecutor Program.
— Rob Bonta (@AGRobBonta) August 29, 2023
The program is designed to be self-funded “as DOJ staff, in coordination with the local government, will seek to recover costs through fines, enforcement actions, stipulated administrative orders, settlements, and abatement liens,” the press release says. In a further incentive to Fresno, it notes that any funding received through the program “that exceeds the cost of services provided as part of this MOU will be held by the city of Fresno.”
In comments first reported by California NORML, Bonta also explained why administrative actions were more appealing than seeking criminal penalties against unlicensed operators.
“When public safety is at risk, we take appropriately aggressive action,” he said. “But low-level offenders that don’t need to be treated as criminals, when we can shut down their operations through the administrative process, we will. And this will ensure that we can uplift and support the licensed cannabis industry.”
“The barriers to entry [in the California cannabis licensed market] are too high. The costs to stay in operation are too high. We should be lowering taxes at least temporarily.” -AG Bonta announcing DOJ’s new CAPP program. pic.twitter.com/I8ExZXjBbf
— California NORML (@CaliforniaNORML) August 29, 2023
The attorney general, who spent nearly a decade as a lawmaker in the state Assembly, also mentioned his support for AB 1684 “to make more robust this administrative pathway.” The measure would grant local governments greater authority to immediately fine unlicensed cannabis activity.
Law enforcement in California has long grappled with how to rein in cannabis businesses operating illegally, and local jurisdictions have occasionally turned to administrative actions in the past. The practice was popular in the late aughts and early 2010s, as cities and towns across the state attempted to shut down an exploding number of storefront dispensaries and unregulated delivery services. While many businesses were penalized, some continued operating, treating fines as a cost of doing business.
The cost of becoming a licensed cannabis business in the state is one factor explaining the presence of illegal grow sites, but another issue that California regulators have identified is the fact that much of the state’s jurisdictions prohibit marijuana businesses from operating in their areas, fueling demand for illicit products since regulated items are costly and out of reach for many consumers.
To expand retail access, California cannabis regulators, are currently spending millions in grants to parts of the state with limited access to legal retailers, a program launched earlier this year. In June, the Department of Cannabis Control issued about $4 million to local jurisdictions in an incentive to speed licensing of marijuana businesses, part of $20 million in total grants set to go out under the Local Jurisdictional Retail Access Grant program.
Localities that have opted out of allowing marijuana retailers, with no plans to license them in the future, don’t qualify for the grants. Likewise, jurisdictions that already have licensing programs or where retailers have already been approved also don’t qualify.
Among potential health and safety hazards more common in unlicensed products, illegal cannabis operations typically don’t abide by environmental laws. Earlier this year, the U.S. Fish and Wildlife Service said that the use of prohibited pesticides in illicit California marijuana grows were significant contributors to its request to list two species of spotted owl under the federal Endangered Species Act. The agency said the practice would likely increase with demand for marijuana “if the costs of buying land and acquiring/maintaining permits to legalize a grow operation are too high.”
Last year, a pair of GOP congressmen asked key cabinet officials in the Biden administration to study the environmental impacts of marijuana cultivation—acknowledging both the intensive electrical demand that growing cannabis can involve as well as the role that legalization can play in setting regulations for the plant.
California’s own Department of Fish and Wildlife’s in 2021 opened applications for proposals for a Cannabis Restoration Grant Program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts.
In further efforts to shrink the illicit market, last year the state adopted a law eliminating the state’s cannabis cultivation tax.
Meanwhile, California is making moves to expand its marijuana market beyond the state’s borders, with regulators recently seeking a formal opinion from the state attorney general’s office on whether allowing interstate marijuana commerce would put the state at “significant risk” of federal enforcement action.
The request for guidance from DCC is a key step that could eventually trigger a law that the governor signed last year, empowering him to enter into agreements with other legal states to import and export marijuana products.
Gov. Gavin Newsom (D) also said last year that he wants to see marijuana federally legalized, in part so that his state’s cannabis farmers can “legally supply the rest of the nation.”
Photo courtesy of WeedPornDaily.
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