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Mendo’s Pot Program Budget

We recently asked the County’s CEO office a few questions about how the County was handling the budget for the new medical marijuana permit program.

Deputy CEO (and County Budget Specialist) Alan ‘The Kid’ Flora provided these extensive replies:

AVA: We have been trying to follow the County’s plans to implement the new medical Cannabis Cultivation program and we note in the latest CEO report that there have been several new hires for that program, particularly in the Ag Department. 

Flora: You are correct, the County has hired four of five additional staff for the Cannabis Program. One Assistant Commissioner (specific to cannabis), two Cannabis Inspectors, and an Administrative Assistant. There is one additional Cannabis Inspector position that is in the process of being filled, but a hire has not been made yet. At this time there are no immediate plans to hire additional staff in other departments. We expect some impacts to Planning and Building, the Treasurer's Office, etc. but the primary impact will be on the Agricultural Commissioner's Office. We are preparing so that we are positioned to hire additional staff expeditiously if it appears necessary.

AVA: How do you (the County, the Board, yourself) see the budget for that new staff and program working? 

Flora: The FY 2016-17 Budget includes funding for the program and staff within the Agricultural Commissioner’s Office. There is no additional funding provided at this time in any other departments.

AVA: Will there be a separate budget unit/line for pot cultivation permits? Will permit applications and associated costs be reported to the Board on a monthly basis? 

Flora: Currently the cannabis program is budgeted in the Agricultural Commissioner's budget (Budget Unit 2710). The program is budgeted separately from the traditional responsibilities of the Ag. Commissioner’s Office (internally), but it is not reflected separately in the County Budget. The FY 2017-18 Budget will include a separate budget unit for the cannabis program so the finances specific to that program are more externally transparent. The Board has not provided specific direction on reporting applications and/or costs, however we would envision the Ag. Commissioner reporting on the program during quarterly budget reports.

AVA: How much will the marijuana permit program cost to implement? And will the County make sure that the processing/staff costs are covered by fees? 

Flora: The Agricultural Commissioner's Office has estimated that with 350 applicants the annual program cost would be $745,832. The Board adopted fees in January that would cover these costs. Of course this is somewhat of a moving target and adjustments will need to be made if the number of applicants fluctuates significantly from that estimate. For example, if the County receives 500 applications, the fee structure should still be valid as far as the amount of time required to process a single application, but the County may need to hire additional staff to handle the increased workload.

AVA: What is the estimated fee/permit revenue for the marijuana program. (We gather that there are upwards of 350 permitted grows, but we don’t know how many have paid or how much they have paid.) 

Flora: The fees under the 9.31 Program included a $1,500 application fee and then a $50 charge per zip tie, with a limit of 99 plants/zip-ties. The maximum cost under this program for a 99 plant grower would be $6,340. Under the Ag. Commissioner's program the application fee is $1,240 and growers are charged an additional $675 for each required inspection. The number of inspections varies based on grow size. Smaller grows will require one additional inspection, and then larger grows will require two. This leaves a permit fee range of $1,915 to $2,590. Nursery operations have the same application fee, but their inspection fee is $725. There are likely to be additional fees paid by the grower, for example for an anticipated "Track and Trace" program, but our intent is that this would be a required grower/contractor relationship rather than passing the fees through the County.

AVA: And how much money has been budgeted (revenue and expense) for this fiscal year and next fiscal year for the new program? 

Flora: The FY 2016-17 Agricultural Commissioner's Budget includes an additional $327,570 in revenue, mostly associated with the cannabis program. This is based on a six month program (starting January 1, 2017), which is why there is a significant difference from the $745,832 estimated through fee calculations, as that number was for a full fiscal year. The fee calculations were also based on more detailed information than what was available when the budget was created nearly a year ago. The budget was based on fee revenue covering 100% of the cost of running the program for six months, except for an additional $64,541 of one-time general fund dollars for program start up. This was intended to allow the Agricultural Commissioner's Office to hire staff approximately one month before program start up and have them trained before the program started in January, as well as new desks, office supplies, etc.. As you know, the program is still not accepting applications until an ordinance is adopted, so the cost to the County to pay for staff that will not be covered by permit fees, will be larger than estimated. Currently the department anticipates being able to cover any additional costs within its current budget and will not require additional funding support this fiscal year. The Board also appropriated $35,000 to remodel existing office space to provide for the cannabis program staff.

The County is just now working on developing next fiscal year's budget, but the budget will initially be based on the numbers established through fee hearings. Assuming that an ordinance is adopted in the next month or two, we will have a small window to update our assumptions on the number of applicants expected, which would impact the FY 2017-18 budget.

While you did not ask specifically about the Cannabis Tax, the revenue from this tax will not necessarily go to support the permit program. Further, it shouldn't be necessary if the fee structure is on target. One of the priorities the Board has indicated for use of the tax revenue is support of additional cannabis enforcement, but it is as yet undetermined whether any of this would be handled through Ag or be primarily for supporting enforcement from public safety agencies.

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