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Business Sense | Humboldt County cannabis: From prohibition prosperity to regulatory realities

Business Sense | Humboldt County cannabis: From prohibition prosperity to regulatory realities

For over five decades, Humboldt County has been home to a unique and significant cannabis industry. Back in 2011, Jennifer Budwig estimated that cannabis contributed a substantial 25% to the local economy. However, this economic prosperity was intertwined with the prohibition era, which sometimes came at the cost of crime and environmental damage.

The shift in tides began around 2015 with the gradual move towards regulation and legalization. While regulation promised legitimacy, it also brought unforeseen challenges. Many small-scale operators found the new regulations daunting. Stringent enforcement by the county led to a dramatic reduction in unpermitted operations. In the past eight years, Humboldt County’s cannabis landscape has seen substantial changes. The sheriff’s office now reports fewer than 1,000 illegal cannabis operations persisting in the hills of Humboldt County, marking an impressive 87% reduction since 2015.

Over the past several years, the cannabis industry has been grappling with the weight of state-imposed regulatory and tax burdens. These, combined with a significant statewide oversupply, have stifled the local industry, rendering it a mere shadow of its former self.

Nevertheless, amidst these challenges, it is crucial to acknowledge the dedication and resilience of those within the legal cannabis industry. Many continue to strive for success within the bounds of the law, with the explicit goal of preserving the unique character of Humboldt County’s cannabis while ensuring its sustainability for generations to come.

Today, approximately 775 distinct and independent cannabis businesses operate primarily as small-scale homestead operations. These ventures are supported by dozens of value-added businesses in Arcata, Eureka, and Rio Dell, playing a significant role in transforming sun-grown flowers into diverse value-added products. Beyond the product itself, these operations collectively employ hundreds, if not thousands, of dedicated workers, constituting the county’s single largest concentration of business types.

As of August 2023, medical cannabis has been legalized in 40 states and the District of Columbia, resulting in increased supply and a natural reduction in overall prices. To put it into perspective, in 2011, Ms. Budwig’s estimate placed the price for cannabis at $1,500/pound for outdoor. Contrastingly, Cannabis Benchmarks now indicate that outdoor cannabis in California sells for around $475 per pound. Importantly, this shift comes with production costs averaging between $350-$400/pound, and Section 280E of the Internal Revenue Code prohibits legal cannabis businesses from deducting otherwise ordinary business expenses.

The overall reduction in the local cannabis industry has palpable effects on the local economy and county finances. The recent draft budget of $578 million for the upcoming fiscal year, reviewed by the Board of Supervisors, reflects the impact of this downturn. A decline in commercial cannabis sales and a decrease in agricultural supplies sales have contributed to the decline in sales tax revenue. Building supply sales have also dipped, further affecting revenue, with County General Fund revenue expected to decrease by 17%.

However, this story isn’t just about dollars and cents. The overall reduction in cannabis operations has a direct and observable impact on the environment and society. Humboldt County has diligently worked over the past eight years to develop a comprehensive regulatory structure, aiming for a well-regulated cannabis industry.

For Humboldt County voters, it’s crucial to know that an upcoming ballot initiative, Measure A, is scheduled for March 5, 2024. As analyzed by the Planning Department, Measure A could “render compliance so arduous that the legal cannabis market becomes unsustainable in Humboldt County.” The potential consequences are clear: Measure A threatens to further stifle an already struggling industry, risking the livelihoods of countless businesses and individuals who have worked tirelessly to abide by the law. Humboldt County’s cannabis industry, though transformed, remains a vital part of the local economy, and the passage of Measure A could be a devastating blow that it simply cannot afford.

Natalynne DeLapp is the executive director of the Humboldt County Growers Alliance (HCGA). HCGA’s mission is to preserve, protect, and enhance Humboldt County’s world-renowned cannabis industry. For more information: and .

This content was originally published here.